Patent licensing is a rather broad topic and it’s easy to get lost in theoretical discussions of it. However, fundamentally, a patent license is nothing more than a legally-binding contract spelling out certain conditions and actions that each party is responsible for taking. Perhaps the best way to move from the abstract to the specific is to examine an actual patent license and discuss what the most important parts of it mean.

The sample license discussed below can be read in full at: http://contracts.onecle.com/occulogix/brunner.lic.2004.10.25.shtml

PATENT LICENSE AND ROYALTY AGREEMENT

THIS AGREEMENT (the “Agreement”) is made by and between OccuLogix, Inc. (formerly Vascular Sciences Corporation), a Delaware Corporation (the “Licensee”), and Prof. Dr. Richard Brunner (“Brunner”) living in Germany and listed as inventor along with Prof. Dr. Helmut Borberg (“Borberg”) in US patent application 09/000,917, which is the parent application of US letters patent 6,245,038 issued June 12, 2001 (the “Patent”).

Seen above is the beginning of the patent license. It begins by specifying who the agreement is between (OccuLogix, Inc. and Professor Dr. Richard Brunner), which patent is involved, and when the patent was issued. Consider this the bedrock of any patent license. No matter whom you license your patent to or license a patent from, any legally-binding agreement will need to spell out who the contract is between and the patent(s) in question before going into any more detail.

Consider this priority number one!

WHEREAS, Borberg assigned all his right, title and interest to the Patent and the Patent Rights to Dr. Hans Stock (“Stock”);

WHEREAS, Stock originally licensed any and all of his rights, title and interests to the Patent and the Patent Rights to the Licensee in an undocumented oral agreement;

WHEREAS, Stock executed a patent license and royalty agreement with Licensee as of August 6, 2004 and amended and restated that agreement as of the date hereof;

WHEREAS, Brunner executed a patent license and royalty agreement with a predecessor of the Licensee as of May 6, 2002 and amended and restated that agreement as of the date hereof;

WHEREAS, Brunner continues to desire to license any and all of his rights, title and interest to the Patent and the Patent Rights derived there from to Licensee, and

WHEREAS, Licensee continues to desire to obtain an exclusive license to all of Brunner’s interest in the Patent and the Patent Rights derived there from and to exclusively own the License to any and all of his rights, title, interests and ownership to the Patent and any and all related patents, rights and inventions that specifically relate to the Patent whether owned now or at any time in the future by Brunner (the “License”), and

WHEREAS, Brunner shall be eligible to receive any and all consideration and compensation from the Licensee, such as those pledged to be made by the Licensee to Brunner under the terms of this Agreement.

NOW THEREFORE, in consideration for guaranteed Advance Royalty Payments and Royalty Payments as described below, and other good and valuable consideration, the parties agree as follows:

This part of the license spells out some basic facts pertaining to the license, such as:
“The licensee (OccuLogix) will be obligated to make payments to him according to terms set forth later in the agreement”.

Consider this a basic framework of expectations, setting the table for more detailed requirements that come later in the contract.

2. License Grant. Brunner confirms that he has exclusively licensed, and does hereby continue to exclusively license, in accordance with the terms set forth below, unto Licensee, Brunner’s entire undivided right, title, ownership and interest in and to the Patent and the Patent Rights, throughout the Territory, to be held and enjoyed by Licensee the same as it would have been held and enjoyed by Brunner if this Patent License and Royalty Agreement had not been made and entered into. The exclusive license granted herein also includes an exclusive right for the Licensee to grant expressly or implicitly, directly or through its subsidiaries or affiliates, sublicenses to the Patent and the Patent Rights without the requirement to pay any additional royalty fee or sublicense fee to Brunner, to end users of the patented method including medical practitioners and medical clinics.

This is an area where not all patent licenses will say exactly the same thing: the specifying of what, exactly, are the rights being granted by the license. In this case, Professor Brunner is granting his “entire, undivided right, title, ownership and interest in and to the Patent and the Patent Rights, to be held and enjoyed by Licensee the same as it would have been held and enjoyed by Brunner if this Patent License and Royalty Agreement had not been made.” Not every patent license grants such a wide scope of rights, but this one does, and if you don’t want yours to, this is the place to make the statement.

5. Advance Royalty Payments. Licensee agrees to pay Brunner Fifty Thousand Dollars ($50,000 USD) annually as an advance and credited against any and all Royalty Payments paid in accordance with this Agreement. Such Advance Royalty Payments shall be non-refundable and be paid to Brunner and in equal payments of Twelve Thousand Five-hundred Dollars ($12,500 USD), made quarterly, on or before the expiration of Forty-five (45) days after the reporting close of each prior calendar quarter.

Advance royalty payments are spelled out in this section of the license. In this case, OccuLogix is paying Professor Brunner $50,000 each year as an advance in exchange for the patent license. This number is not set in stone and is completely negotiable between you and whomever you enter into a license with. Just remember that this is the place to specify whichever number you do agree on.

6. Royalty Payments. Licensee agrees to pay royalties to Brunner totaling One-Half Percent (0.5% in USD). Royalty Payments shall be non-refundable and be calculated and paid based upon Total Net Revenues that Licensee, or any subsidiary of licensee or any company affiliated with licensee receives from the bona fide commercial sales of its…

This is an extremely important part of the license: the specifying of the amount of royalties that are to be paid. This agreement calls for OccuLogix to pay Professor Brunner 0.5% of all income derived from the patent. Again, this is completely negotiable and subject to what you and your licensee agree on.

8. Accounting and Timing of Royalty Payments and of payments of Sublicense Fees. Upon making each Royalty and Sublicense Fee Payment, Licensee shall provide Brunner with a summary of the accounting used to determine the amount of Royalty Payment and Sublicense Fees due. Royalty Payments and Payments of Sublicense Fees shall be made by wire transfer and shall be computed on Total Net Revenues received by the Licensee by the reporting close of each calendar quarter and distributed and paid to Brunner and on a quarterly basis, on or before the expiration of Forty-five (45) days after the reporting close of each prior calendar quarter.

Another important clause shown above is the specifying of when and how often royalties are paid. In this case, royalties are to be paid by wire transfer and 45 days after the close of each prior calendar year. Decide on a schedule you and your licensee are comfortable with and simply modify this clause to reflect the agreement.

As you can see by reading the full sample license, many of these clauses are generic and can be easily changed to suit your own needs. You can assemble your own patent license just by going through this one and making your desired changes. (Of course, the more complex the deal is, the smarter it becomes to have a patent attorney give everything a once-over before you sign!)

PatentHelpNow.com is a website dedicated to providing inventors with free patent help. You can contact us at: PatentHelpNow@gmail.com