A patent for an idea, invention, or product is granted by the government to the inventor. The patent then gives the inventor the right to stop others, for a limited period, from making, using or selling the invention without their permission.

There are both advantages and disadvantages of licensing patents, and for small or start-up business they are a great capital investment. It’s estimated that in order for a start-up to survive its first year, it requires at least £22,765. If your SME doesn’t have the money to manufacture or sell your own product, or your simply choose not, you can license it to someone else.

Pros of patent licensing

For patent owners, the licensing offers many advantages including:

• The licensee is responsible for costs of manufacturing, distribution, packaging, marketing, and sales etc. This means as the licenser you don’t need to find the capital to commercialise your product.
• If you issue a license to an established business, you’ll be able to get your invention to market much faster than if you’d tried to launch it independently.
• Depending on the licensee, you may be able to break into new markets. This could mean international expansion without the risks commonly associated with international markets.
• Depending on the license agreement, you will either receive a one-off payment or royalties from the licensee for the duration of the agreement. This means you will have a stream of passive income.
• While licensing allows licensees to use your invention, you keep ownership of your intellectual property.

Cons of patent licensing

Once you have patented your license it can take a lot of effort and determination to find the right licensee. In order to give your product the greatest chance of success, an expert law firm like Withers, should evaluate potential licensees and help structure your license agreement to ensure it is an attractive proposal, whilst also being profitable for you.

Other potential risks and cons associated with patent licensing include:

• Loss of control over your invention – this could be partially or wholly.
• Relying on the success of the licensee to effectively commercialise your patent.
• Potential of a poor strategy or execution by the licensee that will damage the product success – and future licensee opportunities.
• The licensee could damage your brand or reputation.

When you license your product, you are effectively creating competition for yourself. You will ned to manage your relationship with the licensee carefully, and you should keep detailed records of any contracts or agreements you’ve made.