A patent gives the owner the right to exclude others from making, using, selling, offering to sell or exporting the invention claimed in the patent. A patent license can take many forms but the most common types are generally exclusive and non-exclusive licenses. Owning an exclusive license to a patented technology may be made contingent on the company producing a predetermined amount of royalties. Another type of exclusive license may be limited to a particular industry or geographic territory. Intuitively, a non-exclusive license means that multiple parties may concurrently license the technology, even if they are competitive with each other.
Assignment of Patent Licenses
Many clients are surprised to discover that the type of license granted (non-exclusive versus exclusive) may have a substantial impact in the event the company is sold or acquired. The general rule (unless otherwise provided) is that exclusive licenses are transferred upon a sale but non-exclusive licenses are not.
Furthermore, even if there is an anti-assignment clause, the seller can still acquire the license by structuring a reverse merger into a shell subsidiary of a larger company. The licensee survives the merger into the shell subsidiary and thus the licensee (and its license agreements) survive intact.
Enforcement of Patent Rights
As a general rule, a non-exclusive licensee cannot sue a non-licensed entity for patent infringement. The non-exclusive licensee must demand that the patent owner take steps to enforce the patent rights. An exclusive licensee generally can sue for patent infringement.
Intellectual property licensing arises in various circumstances. A license may be granted to a company seeking to manufacture a novel product developed by an inventor. Two companies settling a software copyright infringement litigation may agree upon a software license so there is no disruption in the defendant’s product availability. A trademark license may be granted to permit another company to use a mark provided the underlying product is of a certain quality and consistency.