The business shape of a license
At its core a patent license is a promise not to sue, granted on terms. The central choices are usually exclusivity, scope, and payment. An exclusive license can give the licensee a strong market position and, in some arrangements, a role in enforcing the patent, while a nonexclusive license leaves the owner free to license others. Scope can be limited by field of use, product category, or territory. Payment may be a lump sum, a running royalty, milestone payments, or a mix, and how the royalty base is defined is a frequent source of later disputes.
Terms that cause trouble later
Under long-standing U.S. law, a patent owner generally cannot collect royalties for use after the patent expires, so agreements that bundle patents with know-how or other rights often allocate payments with care. A licensee is generally not barred from challenging the validity of the licensed patent, and the agreement may address what happens if it does. Other pressure points include audit rights, control over enforcement against third parties, treatment of improvements, and whether the license survives a sale of either company. Antitrust law can limit certain restrictions, and cross-border licenses add tax and export questions.
Before you sign or offer one
We start with what is actually being licensed: which patents, which pending applications, and whether ownership is clean. If you are the licensee, we look at whether the patents read on your product at all and whether other parties hold rights you would also need. If you are the licensor, we talk about how the royalty will be measured and verified and what you want to happen when the agreement ends. Bring the patent list, any term sheet or draft, and the history of discussions with the other side.
