The ultimate patent licensing checklist

Licensing is a gateway to an amazing passive income but the initial steps are key to create the right conditions to land a juicy licensing deal. To protect your intellectual property (IP) and maximize your return on investment, it is critical to understand the legal aspects of licensing and invention. This article will cover key considerations for independent entrepreneurs, including patent protection, licensing agreements, and negotiation strategies. Please note that this article is for informational purposes only and does not constitute legal advice. Consult with an attorney for advice specific to your situation.
Secure the right patent
Before engaging in any licensing or invention-related activities, it is essential to secure patent protection for your invention. A patent grants you the exclusive right to make, use, sell, or import your invention for a limited period. To obtain a patent, you must file a patent application with the United States Patent and Trademark Office (USPTO) or the relevant patent office in your jurisdiction. You can quickly qualify the patentability of your invention by using Chekable in early conceptual phases so you can have first mover advantage. 

Know the strengths and weaknesses of the patent types 
Impact to licensing based on the three primary types of patents:
  1.  Utility patents generally last for 20 years from the filing date. Utility patents are considered the most desirable patent type by licensees as they can provide functional and conceptual protection. 
  2. Design patents have a term of 15 years from the grant date. Design patents protect the ornamental design of a functional item. Which also means that if another competitor changes some design.
  3. Plant patents have a term of 20 years from the filing date. Plant patents protect new, distinct, and asexually reproduced plant varieties. Agriculture related patents tend to have higher value than designer plants for decoration. You might want to do research the market opportunities for the plant you have invented as patents can be expensive

Provisional patents don’t give you much leverage while negotiating  
Filing a provisional patent application can secure an early filing date for your invention while giving you time to refine your invention or raise funds. Provisional applications do not mature into patents but can be converted into a non-provisional application within one year of filing. The benefit of a provisional application is that it allows you to use the term "patent pending" when marketing your invention.

However, experienced licensees value a granted patent as there are significant risks associated with provisional patents and can be rejected by the patent examiner. Provisional patents also do not provide any legal protection, they only secure your filing date in case someone else tries to file for a similar patent after you came up with the idea. We highly recommend checking the novelty of your idea using our Chekable technology and get a provisional to secure your filing date while you iron out all other details in the one year you get. 

Licensing agreements
Licensing agreements enable you to generate revenue by granting others the right to use, manufacture, or sell your invention in exchange for royalties or other forms of compensation. Once you have secured a non-provisional patent, you may want to stall licensing and get your product to market on your own. This is a big step but it also increases your IP valuation significantly as you will be able to show manufacturability, market demand and profitability in the product. It is called de-risking, the more risks you take away for a licensee the higher terms you will be able to negotiate. 

Key terms in licensing agreements
Licensing agreements should be carefully drafted to address essential terms, including:
  1. Scope of the license: Clearly define the rights granted to the licensee, such as the right to manufacture, distribute, or sublicense the invention.
  2. Territory: Specify the geographic area in which the licensee may exercise its rights.
  3. Term: Establish the duration of the license, including any options for renewal.
  4. Royalties: Determine the financial terms, such as royalties based on a percentage of net sales or a fixed fee per unit sold.
  5. Performance obligations: Set benchmarks for the licensee's performance, such as minimum sales or manufacturing requirements.
  6. Quality control: Establish the licensee's obligations to maintain the quality of the licensed products and your right to inspect and approve products.
  7. Confidentiality: Protect your trade secrets and other confidential information by requiring the licensee to maintain confidentiality.
  8. Termination: Specify the grounds for terminating the license, such as breach of contract or failure to meet performance obligations.

Exclusive vs. non-exclusive licenses
An exclusive license grants the licensee the sole right to use, manufacture, or sell your invention within the specified territory. In contrast, a non-exclusive license allows you to grant similar rights to multiple licensees. Consider your business strategy and potential market when deciding which type of license to offer. Managing multiple licensees can be a fairly involved undertaking but can give a higher chance for your invention to succeed as you spread the market coverage. 

Negotiating licensing agreements
Successful negotiation of a licensing agreement requires a thorough understanding of your invention's value and a clear strategy. You will need accurate demographics, competitive analysis, marker traction and customer feedback to back up your evaluation.

Resources for licensing and invention services
To facilitate the licensing and invention process, various services and resources are available online. Here is a list of reputable resources to help you navigate the different stages of patent protection, licensing agreements, and negotiation strategies:

  • United States Patent and Trademark Office (USPTO)
        USPTO provides several programs to help independent inventors and there are special benefits for underrepresented groups as well. Please make sure to qualify and take advantage. 
        Website: https://www.uspto.gov/
  • World Intellectual Property Organization (WIPO)
        WIPO is a specialized agency of the United Nations that aims to promote the protection of IP rights worldwide. Their website provides information on international patent filing through the Patent Cooperation Treaty (PCT) system, as well as resources on IP licensing and technology transfer.
        Website: https://www.wipo.int/ 
  • American Intellectual Property Law Association (AIPLA)
        AIPLA is a national bar association that aims to support IP practitioners, including patent attorneys and agents. Their website offers resources on IP law, as well as a directory of IP professionals.
        Website: https://www.aipla.org/
  • Licensing Executives Society (LES)
        LES is a professional society that focuses on the business of IP licensing and technology transfer. Their website provides resources on licensing, as well as networking and educational opportunities for entrepreneurs and IP professionals.
        Website: https://www.lesi.org/
  • Rocket Lawyer
        Rocket Lawyer is an online legal services platform that provides access to legal documents, including licensing agreements. Their platform allows you to create and customize a licensing agreement tailored to your specific needs.
        Website: https://www.rocketlawyer.com/
  • UpCounsel
        UpCounsel is an online marketplace that connects businesses with a network of experienced attorneys. Their platform allows you to find and hire an attorney specializing in IP law, licensing, and negotiation strategies.
        Website: https://www.upcounsel.com/
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