Licensing your intellectual property

Protecting your intellectual property (IP) is key for any business with a focus on research and development. A patent grants its proprietor monopoly protection on a defined technical scope in the geographical region covered by the patent, for the lifetime of the patent.

Obtaining a patent that covers your invention can be a long and costly process and, once obtained, it may not always be apparent how best to assert your IP rights. There is relatively little litigation in the automotive sector, not least because suing your customers or those that also supply them usually doesn’t go down well.

The question then is: how can you make the most of your IP?
One answer is through licensing. A patent, for example, can be licensed in different ways:

  • a non-exclusive license, which allows a licensee to work (e.g., manufacture, import, supply, sell) within the scope of the patent;
  • a sole license, which then restricts the proprietor from offering licenses to other parties; or
  • an exclusive license, which further restricts the proprietor from working within the scope of their own patent (or in an agreed portion of the patent).

A license is a great option for monetising your IP rights while building-up your reputation as an innovator. However, there are many issues to bear in mind before entering into a license agreement, some of which are outlined below. In general, it is a great idea to involve a patent attorney from an early stage in the process, be they in-house or part of a private firm such as HGF Ltd.

It may sound obvious, but one of the first things to do is to ensure you own the IP rights that you want to license. When a patent proprietor is part of a large conglomerate, it can be difficult to keep in mind the specific entity that owns the patent. When a license deal involves multiple patents having different proprietors each within the same company, things get more complicated still.

  • Remember to check your records and the registers of the national patent office(s) to identify the legal owners of each patent to make sure you own the rights you want to license.

Similarly, another key point is to ensure that your patent(s) actually cover any product/matter which is to be the subject of the license. The scope of protection sought by a patent application will likely change before it is granted, with this change often being a progressive narrowing of the scope. The patent application itself provides no concrete protection until it is granted, at which point only the scope of the granted patent matters. If your patent does not cover another parties’ product, the other party will not need a license.

  • Check the scope of your patents. While an application is being prosecuted at the patent office, be mindful of what the application actually covers compared to what you would want the patent to cover.

In terms of the type of license to offer, it is essential to consider both your own activities within the scope of the relevant IP and the activities of others in the sector, in the present and in the future. Exclusive and sole licenses may provide a higher royalty payment to the proprietor, but the proprietor’s hands will be tied if another party wishes to take a license. Poor forward planning could sour relations with others in the sector, including manufacturers.

  • Be wary of restricting your long-term options by offering exclusive rights.

When considering a new agreement with a party, due diligence should be undertaken by considering your previous and existing license agreements. Such license agreements may include long-term supply agreements with other parties – these may have to be accounted for in any future licensing. The terms of a past/existing license involving your existing IP rights may restrict the use of these IP rights and even new IP rights in a future license. For example, IP rights linked to a past development in cooperation with one manufacturer may be restricted from being used in a new development.

  • Check whether your old agreements restrict any of your IP rights before entering into a new agreement.

Not everything can be covered by a patent, but that does not mean your IP cannot be protected by other means. Your company may have valuable know-how (e.g., trade secrets) which can also form a valuable part of a license agreement and therefore should be suitable protected. The royalties from a license may be predicated both on patents and on other products or services that only your company can provide. A patent can only be licensed during its term, so these other factors can extend the life of a license agreement beyond the term of the patent.

  • Think beyond the life of your IP rights by considering licensing your other expertise.

Finally, it will soon be possible to obtain a unitary patent (UP). A UP will cover a number of participating EU countries, providing the same protection as a national patent in each country. The licensing possibilities for a UP will be vast in view of this multinational nature.

  • It will be more important than ever to make sure your IP affairs are in order before getting in to license agreements for your unitary patents.

This article was prepared by HGF Patent Director Dr Owain Staines. Please get in touch if you would like to know more regarding licensing your intellectual property.