How to Invent and Protect Your Invention: A Guide to Patents for Scientists and Engineers

11.3 SELLING AND LICENSING A PATENT

Selling and licensing differ in the method in which the patent holder's rights are transferred. Selling a patent transfers all rights associated with the patent, including the right to make, use, sell, and import the patented invention. Selling usually has the advantage of allowing the inventor to realize commercial gain immediately, if the sale includes an upfront payment. Thus, one receives compensation prior to bearing the risks that the invention will not become economically successful. However, if the inventor sells the patent, he no longer has control over the invention and likely will not make any additional money if the invention becomes a commercial success beyond what was expected when the terms were negotiated, unless the sale agreement included a provision for subsequent payments based on commercial success.

11.3.1 Licensors and Licensees

Licensing takes place when a patent owner gives someone the right to make, use, sell, or import the invention, in exchange for some type of payment. In a license agreement, ownership remains with the licensor, who grants another the right to make, use, sell, or import her invention, while the licensee is the person or company that gains the right to use the invention. Unlike the single payment that is often made when a patent is sold, licensees usually pay the inventor/licensor either a periodic flat payment or, more commonly, a percentage of revenue earned from the use of the invention. For example, ...