A Quick Guide To The Ways Of Patent Monetization

Licensing a patent entails giving another entity the right to use patented technology for commercial purposes. The original rights of ownership are retained by the license owner, while the licensee can use the tech for a designated period. There are various categorizations of licensing, as explained:  

1. Exclusive Licensing: This form of licensing involves the transfer of rights exclusively to one licensee and cannot thereafter be shared with others for the contract period. In this type of licensing, all the involved parties must agree to proceed with the terms. It benefits the patent owner because they are assured of a fixed sum of money regardless of the product’s performance in the market.  
   For the licensee, it is an assurance that they have a monopoly over the product in the market. Sometimes, the licensor may place certain restrictions on the licensee if they wish to use the residual rights to commercialize in-house or distribute related rights to others. They may take the form of: 
   Product restrictions, which may limit the manufacturer to a particular category of products 
   Field restrictions, to keep the licensee confined to a specific field 
   Geographical restrictions, that limit the territory the licensee may operate in. 
2.  Non-exclusive Licenses 
   As the name suggests, no exclusive rights are given to this type of licensing. The patent owner is free to allow any number of licensees the rights to commercialize the product. This leaves the market open to competition. Non-exclusive licensing provides a lucrative source of income for the owner from multiple sources. For the licensee, it is beneficial because of the reduced licensing fee as compared to the hefty amounts payable for an exclusive license.  
3. Sole Licensing 
   In sole licensing, the licensor retains the right to pursue the technology themselves. It works the same way as an exclusive license, with the single exception that the patent owner reserves the rights to exploit the Intellectual Property, but cannot grant any other sublicenses. The terms ‘sole’ and ‘exclusive’ must always be explicitly mentioned in the agreement, along with the intended meaning, to avoid disagreements later.   
4. Co-Exclusive Licensing 
   Considered a middle ground between exclusive and non-exclusive licensing, co-exclusive licensing means that the licensor is free to grant the license to a limited group of licensees. There are several ways to define this group: by name, description (granted only to those who meet a set of eligibility criteria), or number (a pre-decided number of licenses will be handed out).   
5. Carrot Licensing 
   When a business is not using a patented tech and is under no obligation to take a license, the carrot approach is used to pursue such a business to voluntarily seek the license. It involves marketing the advantages of using the tech to increase the efficiency of the business. The idea is to make patented tech seem valuable to the business and project the benefits it can bring to their processes.  
6. Stick Licensing 
   The stick licensing approach is appropriate when the licensor is already infringing on the patented technology. It offers a chance for the infringer to take a license in order to avoid facing an expensive litigation battle in court.  
7. Cross Licensing 
   Cross-licensing is like a license barter wherein each party voluntarily allows the other to use their tech without the risk of infringement. This exchange of licenses allows both to borrow the necessary elements from each other’s tech and bring the product into the market. There is no licensing fee involved in this type of licensing.  

Advantages of Patent Licensing 
Patent licensing offers various benefits, like: 

• The opportunity to bring the product into the market without spending the time or resources in manufacturing.  
• Reducing the risk of vagaries of the market. The licensor gets paid regardless of the product’s performance.  
• You can gain royalties from infringers without getting involved in a costly litigation battle. 
• The Licensor retains the ownership of the patent. 
• The product gets a faster launch with better market penetration courtesy of the licensee’s marketing and distribution network.