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What is a license to a patent?
A patent license is a contract between the owner of a patent and an independent party who wishes to make, use or sell the invention claimed in the patent. Such a contract is in essence a promise by the patent owner that the owner will not sue the independent party, called the licensee, for patent infringement, provided that he or she complies with the terms of the contract. Typically, the licensee agrees to pay the patent owner a percentage of the revenue the licensee receives from sale of the invention and/or other license fees.
Patent licenses are important legal contracts that help to ensure the rapid and efficient utilization of many inventions and the transfer of information for development of future inventions. A patent does not itself ensure that an invention will be used or be economical. Many inventions require significant capital investment before they can be used commercially. This is particularly true of biotechnology inventions, because the cost of developing a drug often exceeds $800 million. By licensing a patented invention to a third party, a patent owner who may not have the resources to fully develop an invention can work with a third party to commercialize it.
In some cases, a license from more than one person may be necessary to use an invention effectively. For example, one party could obtain a patent on a new protein, while a second party obtains a patent on a new use of that same protein. In order to sell that protein for the new use, a third party would require a license from both patent owners. If the two patent owners want to sell the protein for the new use, they would need to grant a license to each other. Such licenses are often called cross-licenses. In rapidly developing fields of technology, cross-licenses are very common.
If a third party does use a patented invention without a license, the patent owner can seek legal remedies for infringement. Such remedies can include damages and an injunction against the infringer to prevent future use.
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