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Patent License Agreements

Postby tony.fulford » Fri Feb 08, 2008 2:07 pm

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Patent License Agreements are crucial to an inventors success. There are many things you can do on your own in the invention process, but negoitiating a patent license agreement is not one of them. These agreements are legal intensive and are not for the amatuer. That does not mean it has to cost you real money. I use attorneys in negoitiating my license agreements under the following terms:
  • The attorney must negotiate an upfront payment
  • The attorney receives 1/3 of the upfront payment if they negoitiate a royalty that is the industry average
  • The attorney receives 2/3 of the upfront payment if they negotiate a royalty that is 1% above the industry average
  • The attorney receives the entire upfront payment if they negotiate a royalty that is 2%, or more, above the industry average
Now, some companies (the biggies), do not, and will not, pay the industry average (that's what makes averages). If the license attorney can show that a company is in that category, they get 1/4 of the upfront payment if we decide to go with one of those companies. License attorneys also keep a list of companies that are open to accepting ideas and patents, so they are a good resource for companies you may not discover.

The following is a typical patent license agreement and comes from:
I am not going to go over it in detail, but rather, I am going to post it and let you have questions about it wherever you desire. Please provide a section and line number for reference in your question. I will do my best to answer any and all questions, but just keep in mind I may have to go to my attorneys for some of your answers and it may take more time than usual. You must understand the following:
    This license agreement, and my answers to your questions, IS NOT legal advice. You should seek legal counsel before you use this or any answers I may provide.


________________________________________________________________________________________________

PATENT LICENSE AGREEMENT

THIS AGREEMENT, effective this 8th day, of February (month), 2008 (year), is entered into by InventionsOnDemand, LLC (hereinafter “LICENSORâ€
Last edited by tony.fulford on Sat Feb 09, 2008 5:35 am, edited 1 time in total.

Postby Average Inventor » Fri Feb 08, 2008 2:54 pm

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Tony,

Thanks for posting this great information! I'm sure many of us will benefit from better understanding the agreement and the process behind a successful licensing deal.

Postby DannyB » Fri Feb 08, 2008 5:41 pm

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Tony,

In using an attorney to negotiate for you, is it typical for the attorney's portion of the up front payment to be their only compensation, or do they get a percentage of the royalty as well?

Postby Michelle » Fri Feb 08, 2008 11:49 pm

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To add to Tony's resources, please note that our Inventor Information section on lawyers has samples of license agreements along with other agreements helpful to inventors.

You can check them out here.

http://inventorspot.com/lawyers

Postby Michelle » Fri Feb 08, 2008 11:56 pm

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A couple of Amazon resources for licensing has these books:

[url=http://www.amazon.com/gp/product/1413304508?ie=UTF8&tag=americaninven-20&linkCode=xm2&camp=1789&creativeASIN=1413304508]Profit from Your Idea - What Inventors Need to Know to License Their Invention
[/url]
Licensing Best Practices

[url=http://www.amazon.com/gp/product/B000PY4R1O?ie=UTF8&tag=americaninven-20&linkCode=xm2&camp=1789&creativeASIN=B000PY4R1O]Licensing - Issues
[/url]

Drafting Patent License Agreements

Some of these are technical but understanding key points of a negotiation before hand will make conversations with your lawyer easier and save you money in the long run.
Last edited by Michelle on Sat Feb 09, 2008 6:54 am, edited 1 time in total.

Postby tony.fulford » Sat Feb 09, 2008 5:31 am

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DannyB

They only get a portion or all of the upfront payment, NO royalty.

Locating Attorneys

Postby tony.fulford » Mon Feb 11, 2008 1:16 pm

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The best place to start for locating attorney's to negotiate license agreements is:

You are not going to be able to get the high visibility attorneys for your license agreements. You want to find up-and-coming attorneys that want to make a name for themselves. Make a list and call them and interview them by telephone. Do not be intimidated, remember that you are the customer and you want to find an attorney that is a good, hard negotiater. I interviewed fifteen attorney's to select two to negotiate for me when I started. At that time I had nine ideas that companies had accepted and that required license agreements. Since then it has grown to seventeen ideas that these two are handling and I am now interviewing for an additional attorney to handle a backlog of eight more ideas that have been accepted.

The best attorney I have at the present time is a tough lady that works from her home. For such a sweet and pleasant person, she takes the companies to task when it comes to negotiating license agreements. She does her homework and educates herself well on the industry. She has access to all those expensive reports that give royalties by industry and she is very well prepared before she ever contacts the companies. Thus far her fees have ranged from about $4,000 to $22,000 and she is now working with a company for a residential door hardware system (five ideas/inventions) that looks like it may come in at about $75,000 for her. So don't get to feeling sorry for the attorneys; If they do their job properly, they can come away very happy.

Using an attorney to draft and negotiate license agreements gives you a very professional appearance and in the end makes you and the attorney money.

a company wants to negotiate, pitfalls to avoid

Postby lizzie00 » Wed May 28, 2008 7:27 am

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ok, i finally have a company interested in licensing my product (you would think i would be jumping up and down for joy, but ugh, again unchartered territory for me, choppy waters).....they asked me for what i am looking for in the contract...and i bounced it back to them asking what types of licensing options do they consider......(kind of like a chess game already).......i've read what i have been able to find....and i am holding off in using my patent lawyer for as long as possible (ugh $250/hour adds up so fast).....i am wondering if anyone has any words of wisdom for me?...

Postby lizzie00 » Wed May 28, 2008 7:31 am

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my first step will be digesting all the replies under this post

cron