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Oneself, Non-Exclusive or Exclusive Licensing
Posted by Anonymous . updated on 2/26/2009
I read this article and it was interesting, can someone give me their legal or personal opinion on the accuracy of this opinion. Especially the part where he recommends Non-Exclusive licensing as a legal strategy against infringement (exclude the tax comment).
Part of Article:
There are four basic marketing strategies.
1) Manufacture and market the product exclusively yourself.
2) Grant an exclusive license to one party.
3) Sell the patent outright.
4) Grant non-exclusive licenses to any party.
If your patent gives you a lock on a large market number 1 or 2 will encourage other companies to infringe and or attempt to invalidate your patent. It may be necessary to grant an exclusive license if a significant startup investment is required to bring the idea to market. Outright sale removes most the burden of defending the patent but could result in dramatically less income for you if the patent is very successful. You can still be charged with inequitable conduct and dragged into litigation even after you have sold the patent.
Non-exclusive licenses remove much of the market pressure to get around the patent and ensures that you are compensated proportionate to the success of the patent's idea. In most cases a non-exclusive license is most profitable for the inventor and therefore the best method of marketing your idea. One other consideration is that income from an exclusive license that is properly drafted may qualify as long term capital gain resulting in lower taxes.
For those wanting to read the entire article, it's a good one for inventors, it can be found here:
http://www.rjriley.com/acq&def.html
Thanks in advance.
Miguel
Answers (1)
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JimIvey
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First, I'm no licensing expert. So, these are all guesses, to some extent, on my part.
I don't think you can reduce licensing strategies to (i) everything is exclusive or (ii) nothing is exclusive. Many aspects of a license can be made exclusive or non-exclusive independently of one another. A license can be made exclusive within a geographical region -- e.g., exclusive rights in California and non-exclusive rights in the remaining 49 states. A license can be made exclusive in a particular industry -- e.g., exclusive rights in labeling pharmaceuticals but not in labeling snack foods (for a labeling technology). A license can be made exclusive in time -- e.g., exclusive for 10 years, non-exclusive thereafter.
And the list goes on and on. The particular motivations for different types of licenses are as unique as the potential licensees themselves. A new player in a tight market of 3-4 large established companies might be very interested in an exclusive license or an outright purchase to gain leverage over the established competition. A company threatened with extinction in a patent battle would pay dearly for one that the other patentholder infringes to save itself a huge patent infringement liability.
I wish it were as easy as A is generally better than B -- non-exclusive is generally better than exclusive, but it isn't.
Regards.
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