Patent licensing

1. By Ethunandhan S
5th year, B.Com.;LL.B(Hons.)
SASTRA University, Thanjavur

2. Patent is an exclusive right granted for an
invention, which is either a product or a process,
and offers a new way of doing a work or provides
with a new technical solution to an existing
problem

3. Patent Licensing is an act of or a process of granting, to a
third party, permissions to extricate benefits by selling and
using the licensed product. The patent owner gives license
to a third person to use, sell and extract benefits from his
patented invention, for an amount already decided as
royalty.

4.  As per Section 68 of the Patent Act, 1970, for a patent
license to be valid, the agreement must be in writing.
 In PVR Pictures Ltd. v. Studio - (2009) 41 PTC 70] case,
Delhi HC held that term sheet agreement (Term Sheet is
the initial basis for a license the intellectual property
rights specified below, and sets forth the primary
licensing terms as agreed upon by the undersigned parties)
shall not amount to a license agreement.

5. TRANSFER OF RISKS -
Manufacturing and production of a design or products have a lot many
risks involved. With patent licensing the patent owner can transfer such
risks involved in production of patent design or product to the licensee.
GLOBAL MARKET -
It becomes difficult for many companies to have a mass production of a
product individually. Patent licensing comes to an aid to overcome this
difficulty as it permits other organizations to produce the patent products
and thereby help in mass production. Patent licensing thus can help in
introducing ones invention in the global market.

6. LIMITED PERIOD -
Because patent licensing is done for a limited period, the owner gets back
his exclusive rights over his invention as and when the license duration
expires.
COMPETITIVE ADVANTAGE -
If the patent is licensed to an already established organisation with a large
customer base, the patent product will have a larger market to capture in
comparison to other patents, giving it a competitive edge over other
patents.

7. DIFFICULTY IN DETERMINING LICENSEE –
It takes lots of efforts and time to determine the appropriate licensee for the
invention. It is essential to get a potential licensee and have a structured
agreement in order to have the greatest chances of success.
LOSS OF CONTROL -
For the period of license, the patent owner transfers his rights to the
licensee. Result of which is he loses his own control, either partially or
fully, on his own invention.

8. RISK OF LICENSEE'S ABILITY -
The patent owner relies on the efficiency and abilities of the licensee to
effectively commercialize the patent product. The risk of poor strategy and
quality management can adversely affect the patent reputation and success.

9. EXCLUSIVE LICENSE
An exclusive license is one in which all the rights of the patent is
transferred to the licensee, except the title. In such case, the licensee has all
the rights as of the patent owner except of transferring the patent to another
person. In this type of license, the chances of the patent getting infringed is
minimal as the rights are less being exploited and the licensee has the
monopoly over the market.

10. NON-EXCLUSIVE LICENSE
In a non-exclusive right, the licensee has the right to sell and make the
patented design, but such right is not exclusive. Patent owner may grant
permission to use and make such patented design to any other person also.
In this case, all of them have the right to make, use and sell the patented
design. The rights enshrined by this license is not exclusive to a particular
licensee.
SUB-LICENSE
It is a type if license issued by the licensee to different organizations to
make the products. Sublicense can be said to be granting of certain licensed
rights on a product to a third party by the licensee.

11. CROSS LICENSE
When a product requires support of some other product to make its place in
the market and for better utilization, cross license is preferred. Cross
license can be understood as exchange of license between different
organizations and individuals. Recently, Ericsson and Oppo entered into a
cross license agreement between them covering various patent portfolios of
both the companies including portfolios of 2G, 3G and 4G.

12. COMPULSORY LICENSE
When the government grants permission to any individuals or
organizations to use, sell or make a patented design or product, irrespective
of the will of the patent owner, for the public good, it is referred to as
compulsory license. Compulsory license is usually seen being granted in
the pharmaceutical products and the products which fulfils the criteria as
mentioned in Section 84 (a failure to meet reasonable public requirements;
the inaccessibility of the patented invention at a reasonably affordable price
to the public; (or) the non-working of the patented invention in India) of
the Patents Act, 1970. The first compulsory license, in India, was given
to Natco Pharma Ltd. for producing generic version of Nexavar which
was a patented medicine of Bayer Corporation, on March 9, 2012.