Watson IP Group

Watson IP Group

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What is Licensing a Patent or Assigning a Patent, and How are they Different?

A license vs assignment of a patent; different strategies.

When you license a patent to someone, you essentially grant the right to a third party to make, use and/or sell the invention that has been patented. The third party can be one or more individuals or businesses, for example. A license can be exclusive to one third party, or non-exclusive, meaning that you can license multiple different third parties that license at the same time. You can grant a license for a geographic region (i.e., portion of the United States) or for particular sales channels (i.e., brick and mortar sales only), and for a period of time that is less than the term of the patent. There are many other conditions and/or limitations that can be placed on a license between two parties of a patent.

On the other hand, when you assign a patent, you formally transfer all rights to the patent to a third party. These assignments can be for parts of, or the entirety of a patent.

In either instance, agreements of this type are done through a formal legal document, which may be called an assignment agreement or a license agreement.

A number of businesses develop technology and obtain patents solely to license or assign the patent to a third party. Other businesses develop technology to specifically make, use or sell the invention that is patented. Still other businesses are solely purchasers of the patents of others. There are often hybrid businesses that do any combination of buying patents, selling patents and obtaining their own patents.

There are any number of variations to either a license or an assignment. And, in some instances, there can be a combination. For example, a license can be limited in any number of manners, it may revert back to the owner in certain circumstance, it may or may not be assignable to a third party. There may be geographic limitation, product channel limitations, product type limitations, customer type limitations, among others. The same can be true with an assignment. The assignment can be conditional, can be restricted to territory or as to many of the other limitations set forth with licenses.

In some instances, an agreement may start as a license and may change license types during the term of the license, and may also become an assignment. For example, party A can license party B to sell a product exclusively in territory X and non-exclusively in territory Y. The agreement can state that if sales rise to a certain level in territory Y, then the license becomes exclusive, or if sales fall to a certain level in territory X, then the license becomes non-exclusive. Additionally, the agreement can state that if the sales rise to a certain level, upon payment of a fee, for example, the license becomes an outright assignment. These are all different variations that can be part of an agreement pertaining to a patent. And, from this example, it is easy to see that the options are generally limitless in their simplicity or complexity, and can be amended to fit any number of different situations and factual considerations.

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