Patents have other uses besides preventing others from making, using or selling the
invention. Instead of attempting to develop and promote the technology of the patent
directly, many inventors and patent owners choose to license or assign a patent to
others who may be in a better position to exploit the patent rights (i.e., either due to
their size, experience, market or etc.) Patents can be licensed for royalties to help
repay research and development costs or provide an income stream for the inventor.
In some situations, patents owned by one person or company can be offset against a
claim of infringement of another person/company's patents (i.e. a sort of retaliatory
defense). Perhaps the most significant secondary benefit to many companies is that
patents can sometimes form the basis of cross-licensing, thereby allowing a patent
holder to acquire a license under a competitor's patent where the competitor may not
be willing to grant a license for just royalties.
A patent license can be granted by the inventor or patent owner to allow another
person or entity to make, use or sell the subject matter of the patent in exchange for a
royalty stream (i.e., based on a percentage of the selling price of the product), for an
upfront lump sum amount, or for combinations of the two or a variety of other forms of
renumeration. The inventor or patent owner (the licensor) maintain ownership of the
patent and, depending on whether the license is an exclusive or non-exclusive license,
can still make, use and sell the invention or license others to do so. The person
receiving the license (the licensee) only has the rights and obligations set forth in the
An assignment of a patent transfers ownership of the patent from the inventor or
patent owner (the assignor) to the person being assigned the patent rights (the
assignee). Once assigned, the inventor or original owner no longer have any rights to
the patent. All patent assignments must be in writing to be effective. Like licenses,
assignment agreements can provide for a payment royalty stream, upfront lump sum
payment or other types of renumeration. While some types of relationships result in an
"automatic" assignment of the patent (such as an employee who invents something
during the scope and course of his or her employment).
Patent applications, issued patents and even pre-filing inventions can be licensed
or assigned to other persons. To protect the licensee or assignee from any subsequent
license or assignment of the patent rights, the license/assignment agreement should be
recorded with the Patent and Trademark Office as soon as possible, but no later than
three months after execution of the agreement.