Intellectual property can have value in the form of a copyright, trademark, or patent. A copyright is protection for artistic and creative works. The holder of a copyright owns certain exclusive rights in the work, such as the right to distribute, copy, or display the work. A trademark is obtained for a unique and valuable logo, phrase, or mark used in commerce. Trademark law is based on the concept of “substantial similarity”, whereby another cannot use a mark that is substantially similar to another’s registered trademark. Patent law protects inventions or processes with physical or scientific implications. Patent protection, while more difficult and expensive to obtain then copyright or trademark protection, is very broad and exclusive, and provides for severe remedies upon breach.

An Intellectual Property Assignment and License Agreement is a unique agreement. In these agreements, one party is selling to the other the rights to their copyright, trademark or patent. However, since the selling party still wishes to retain the right to use the copyright, trademark, or patent for themselves, they ask for a “license back” to the property. Thus spawns the Intellectual Property Assignment and License Agreement, which in a sense, is actually two agreements in one.

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In a Patent License Agreement one party (licensor) grants to another party (licensee) for consideration the revocable right to perform an act that would otherwise be illegal without the licensor’s permission.
The act in question is use of the licensor’s patented invention. The grant of permission, called a license, may be exclusive or non-exclusive and is limited in scope and duration.

The licensee receives the benefit of using the licensor’s invention, and the licensor gets a royalty fee for this use. Generally, with certain industries excepted, a licensor can expect to get a fee of five percent of the licensee’s net sales.

Patent License agreements consist of several key provisions:

• The license grant: what is being licensed? To whom? For how long? In what capacity? May the licensee turn around and sublicense the invention to a third party?
• Royalties and fees for maintaining the patent.
• Records and reports-the licensee keeps them, the licensor may view them.
• Improvements-what if the licensee improves the invention? Who benefits?
• Infringement-what if a third party infringes on the patent, particularly if the third party is a sublicensee? Is the licensee obligated to defend the patent? (What if the licensee wishes the patent to fail?)
• Will the invention be marked? How?
• Will the licensee receive know-how and technical assistance from the licensor?
• General boilerplate clauses.
• Companies use patent license agreements for several reasons.
• The licensor may not have the desire to develop the invention-it’s outside the company’s core business.
• The licensor may not have the money, time, or capability to develop the invention.
• The licensee may need the invention to further its own needs.
• The licensee may be better position, financially and operationally, to develop the invention, for the benefit of both parties.

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