Regarding basics for patent licensing, you must know (1) what patents are being licensed, (2) the type of license you are granting, (3) who will obtain the license, (4) what activity will be licensed; (5) and how to protect your damages base.
In this post, I’ll be discussing (2).
2. What type of license are you granting?
When granting a license to a third party, you want to ensure that the third party cannot grant licenses to any other party. If so, this will create a loophole in which, rather than paying you for a license, potential licensees will pay the third party for the license—this is detrimental to your monetization campaign.
To ensure that the third party cannot grant licenses to other parties, have the following terms in the licensing language:
- No right to sublicense. If a third party has a right to sublicense, then it has the right to grant licenses to other parties–this is a loophole you don’t need. Explicitly note in the agreement that you are not granting a right sublicense the patents-at-issue.
- Non-exclusive license. If you grant an exclusive license, then only that third party can grant future licenses, not you. Again, not what you’re looking for. Explicitly note in the agreement that you are granting a non-exclusive license.
- Non-transferrable / Non-assignable. When granting a license to a third party, you want to ensure that only that party will have the license and that it will not flow to some other party. Explicitly recite that the license is non-transferrable and non-assignable.