Understanding & Negotiating Licensing Agreements

Patent licensing agreements are legally based in two bodies of law: contract law and the law of torts. Contract law enforces promises that people make in the form of contracts, while tort law enforces reasonable conduct among people.

In a typical patent licensing agreement, the heading covers the effective dates of the agreement and the parties engaging in the agreement. This is followed by a background section which is designed to aid in the interpretation of the agreement. This section is usually not considered a binding part of the formal agreement, and it provides some introduction of the parties and the inventions covered by the agreement.

The main body of the licensing agreement includes more definitions, a grant of license, payments, records and reports, improvements, infringement and patent markings among other things.

While writing up a patent licensing agreement can be straightforward, the difficulty lies in the negotiation of licensing terms between the inventor and the licensee. Among the various types of agreements, technology licensing agreements are usually quite complicated, especially when they are being negotiated between international parties.

A helpful manual to navigate the licensing agreement process is published by the World Intellectual Property Organization (WIPO) and the International Trade Centre (ITC). Experts at these two organizations have combined their skills and knowledge to create Exchanging Value: Negotiating Technology Licensing Agreements.

This user-friendly manual is idea for training purposes, with its practical guidelines based on case studies. It addresses all of the important issues that parties will encounter during the negotiation process, including determining when to license and the importance of preparation for licensing negotiations.

There are also sections on how to value technology and how to deal with the most common problems that arise in negotiating licensing agreements. It stresses the importance of seeking win-win agreements and provides guidelines for negotiations.