Read Why Companies Turn Down The Offer To License Or Buy A Patent

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Let’s say a person “X” had a great idea and decided to file a patent. The patent got granted. Then, “X” made a wise decision to try to license it or sell it for monetary benefits. “X” searched himself and hired an IP firm to search for the prior arts but didn’t find any relevant prior art. “X” created a sell sheet with comprehensive details about the invention and selected the target companies to license or sell the patent. “X” presented the idea to selected companies by contacting them directly. 

But still, “X” received a communication from the companies stating that the company is not interested in licensing or buying the patent. 

What could be the reason behind this? 

Table of Contents

There could be many reasons why a company turns down the licensing or buying of patents. Let’s throw some light on them  
  1. The Company doesn’t want to enter a new market. 
    The company is working on a different technology than the patent. Suppose the patent doesn’t pertain to what the company is already selling in the market. In that case, it is similar to asking them to redevelop their marketing strategy, identify potential buyers and identify the new manufacturer and distributors. 
  2. The company doesn’t consider outside patent submissions. 
    Some companies follow the old-school approach. These companies haven’t accepted the idea of open innovation, which is eventually their loss. While these companies state publicly that they will accept outside submissions, in reality, their approach is, “If it is not invented here, we won’t accept it.”  
  3. The company may think of you as a patent troll. 
    A patent troll is an entity (company or person) that enforces the hoarded patents against the potential infringers without itself manufacturing the patented product or supplying the patented service. The company may have mistakenly identified the patent owner as a patent troll because the patent owner doesn’t practice the asserted patent. 
  4. The patent term is less.
    The patent owner decided to hold onto the patent for too long and then tried to license or sell it. Big organizations may avoid investing in such patents that are about to expire in a few years because of the limited timeframe to turn the exclusive rights into a profit before the patent expires. After the patent expiry, the patent owner loses the exclusive right to profit from the patented invention. Then, the companies can make, use, and sell the product or process it themselves. 
  5. The company decided to check for pre-existing literature. 
    After the patent owner provided the sell sheet, the company decided to check the patent’s validity and found some potential prior arts. Therefore, they decided to turn down the licensing or buy the patent. 
  6. The patented invention was too complex. 
    The patent owner probably over-designed the invention, which resulted in increased manufacturing costs of the product and rendered it unprofitable. Also, the product cannot be manufactured using the current manufacturing line of the company due to its complexity. 
  7. The market for the idea is too small.
    The company determines that the licensing of the patent is too risky. It might not be pricey enough. 
  8. The lack of negotiation skills. 
    The amount of money demanded from the company by the patent owner is unreasonable, and the company decided to turn down the offer. 
  9. Transferring Ownership is a hassle. 
    Depending upon the jurisdiction, the cost of assigning a patent to another entity may range from $235 to $1549. The original owner must record the assignment with the Assignment Recordation Branch by filing a recordation Cover Sheet and a copy of the actual assignment. Small-scale companies avoid any additional costs that may occur. 
  10. The patent owner missed the product development cycle.
    In most companies, new products are developed at certain times during the year. The patent owner might have to wait twelve months, depending upon the industry, if they miss the right window. 

One shouldn’t give up licensing or selling their patent just because a company turns them down. One must try to establish relationships with these companies, so that they may consider licensing or buying the patent in the future. Also, the identification of potential licensees and conducting a proper prior art search of the patent in question is an important aspects before someone decides to license or sell the patented idea.  

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