Industry Standard Royalty Rates

November 16th, 2014

Are you interested in licensing your patent idea but aren’t sure where to start? Our team created this infographic just for you. This infographic explores what impacts royalty rates as well as the standard royalty rates of common industries. If you have any questions, feel free to email us at TomS@IdeaBuyer.com.

We originally published this infographic on Entrepreneur.com.

Patent Royalty Rates

Patent Licensing – The Ultimate Guide

July 7th, 2014

Patent Licensing Info Guide

Patent licensing is considered one of the most viable means of commercializing a patent. In short, a patent holder seeking to license his patent will not exploit it himself. That is, he will not try to create, market, and sell anything based on the patent. Instead, he will market the patent itself to those who do wish to take those steps. Any variation of this is known as “licensing a patent.” However, it is best to know some facts about licensing patents before one rushes to do so, or assumes that licensing is a “set it and forget it” means of cashing in on their intellectual property.

What is Patent Licensing?

Legally speaking, you have licensed your patent when you (the licensor) grant exploitation rights over your patent to a licensee (the person you are licensing it to.) “Exploitation rights” simply means the right to create, market, and/or sell something based on what that patent protects. A license of this nature is also a legal contract, and that contract is what will spell out in concrete terms precisely which exploitation rights are being granted. These include any performance obligations the licensor might demand of the licensee. This means that if any performance obligations are included in the contract (ie, “You must produce X number of sales by the year X.”), and they are not met, this could lead to the patent licensing being terminated in its entirety. In this context, a license is also revocable – ie, cancellable – if certain terms and conditions are not met. This is a common characteristic of legal contracts in general, with special ramifications for patent licenses. The only way to grant someone irrevocable exploitation rights, it should be added, is to assign them the patent. Assignments, however, are permanent. They entail the sale or outright transfer of the patent by the assignor to the assignee. An in-depth exploration of patent assignments is beyond the scope of this article, but just know that they are an option if irrevocable exploitation rights are something you seek.)

Patent Licensing: How to Capitalize

Now that you know what patent licensing is and what it involves, we can move on to a discussion of how to capitalize on them financially. The primary means of doing this is to seek royalties from the licensee in exchange for using your patent. Royalties, typically, are paid over the life of the patent. The amount and frequency with which royalties are paid from licensee to licensor must also be spelled out in the license agreement. In this way, the licensor is protected. If the licensee fails to pay the royalties that were agreed to, the licensor can revoke the patent license and retain sole exploitation rights over it.

Patent Licensing Structures

Here is an example of how this might work in practice. Let us say you licensed your patent to someone in exchange for royalties amounting to 20% of all sales resulting from your patent on a yearly basis. If your licensee creates something from the patent that results in a profit of $100,000, you would be entitled, by the terms of your license agreement, to $20,000 of that profit. If the licensee failed to disburse those funds to you, he/she would be in violation of the agreement and you could then proceed to revoke the license. (Again, the danger with using patent assignments over patent licenses is that failure to pay royalties will not revoke the rights you have already assigned. You will be free to litigate for the lost royalties, but this is often an expensive and lengthy process. With a patent license, the matter is more or less open and shut. Failure to pay royalties means revocation of the license.) Now, some more elaboration on performance options is in order as well. Performance options are a form of protection for the licensor. They are a way to ensure that the licensee does not “sit on” the patent, ie, do nothing with it and thereby starve the licensor of the ability to capitalize on it elsewhere. There are two basic types of performance options that can be written into a patent license agreement.

Patent Licensing Performance Options

The first kind is pre-market entry milestones. In short, these are obligations that the licensee is expected to achieve or meet. They could include things like bringing the invention under a trial or validation process, creating a working prototype, satisfying pertinent regulations, progressing through any clinical trials that exist, and so forth. These performance obligations ensure that things move along at a steady pace without any income-killing lag in activity. It prevents the licensee from become inactive as a rights holder. The second kind of performance obligations are post-market entry sales targets. These take effect once the invention is out of the development stage and available for sale on the market. Very simply, such obligations include sales targets, profit margins, or any other measurable goal tied to the performance of the idea in the free marketplace. These obligations give the licensee concrete goals that he must attain and give the licensor a bare minimum of royalties that he can expect to reap.

Other Recommended Patent Licensing Articles:

In closing, licensing a patent is one of the most reliable ways to capitalize off of one’s intellectual property. By working with a patent lawyer to draft a patent license agreement and choosing your licensee(s) carefully, you will greatly increase your chances of successfully licensing your patent. If you have any questions, feel free to email me at ericcorl@ideabuyer.com.

How to Conduct a Patent Search

July 2nd, 2014

Patent Search One of the most common obstacles facing the new inventor is how to conduct a patent search. There are many reasons why an inventor would want to do this. The most obvious reason is to justify spending a great deal of time and money on an invention by determining that no one else has patented it. You may even have a specific patent number that you want to investigate further for any similarities to your project. Whatever the reason may be, the ins and outs of conducting a patent search are not always obvious. In this guide, we will explain how to do so in easy to follow steps.

How to Conduct a Patent Search Video

How to Conduct a Patent Search Step One:

Narrow your search to a 5-15 very specific names. This is a crucial yet oft-overlooked step in the patent search process. Before running any type of search, anywhere, you need to narrow your search to a handful of very specific names. This is because the United States Patent and Trademark Office (USPTO) demands specificity. The vaguer a patent is the more control the holder can exercise over the market. Therefore, there is an immense burden on patent applicants to be as narrow and specific about the nature of their patent as possible. You need to heed this fact when running a patent search. For example, if the patent you are looking for pertains to an online shopping database that ties a user’s shopping preferences to his shopping history, running a search for “online shopping database” is almost pointless in this context. It will return more results than you could possibly screen, and few if any will be relevant to what you are looking for.

Instead, a much better search would be something like “online shopping history based matching metrics.” The closer you can get to describing what the patent truly protects, the more helpful your search results will be. Simply think long and hard about what you are looking for and come up with 5-15 very specific potential names for it. These are the names you will use to conduct your search.

How to Conduct a Patent Search Step Two:

Run the search via the USPTO’s official website. It used to be that the only way to run a patent search was hiring a patent attorney. Prior to the advent of the Internet, these attorneys had a near exclusive monopoly on running searches and doing all manner of patent-related work. Fortunately, this is no longer the case. Anyone who wants to run a patent search can visit the USPTO website and do so in a simple, self-service fashion. http://www.uspto.gov/patft/index.html There are a couple of options at this page that you can use depending on your exact needs. If you just want to run a cursory search for the patent you have in mind, the Quick Search will work wonders. From here, you can type in two descriptive terms and specify the years between which you would like to search: either 1976 to the present or 1790 to the present. Now, common sense will go a long way towards making your life easier in this regard. If the patent you are searching for is in any way high-tech, you can filter out a lot of irrelevant results by choosing the “1976 to the present” option. However, if your invention is timeless or mechanical in nature, the full “1790 to the present” option is probably best. You can also drill down into the patent database for the exact type of information you want. Clicking the “All Fields” drop-down menu turns up a cavalcade of search options. You can search for the abstract, the issue date, patent number, assignee name and city, and about a dozen other options.

SRC: http://patft.uspto.gov/netahtml/PTO/search-bool.html

However, what if you already have a patent number and just want to see information about what it pertains to? This link takes you straight to a patent number search. Just key in the number and click “Search” to find the full text of the patent in question. SRC: http://patft.uspto.gov/netahtml/PTO/srchnum.htm Now, you may notice in using these pages that the USPTO’s website is not the most user-friendly resource out there. Luckily, there is an easier way: Google Patent Search. The reason we covered the USPTO’s site first (or at all) rather than Google is because this is the official first source of all patent-related data. While Google is by all counts reliable, you should use the USPTO’s site if there are any worries about gaps in the patent records you are seeking.

How to Conduct a Patent Search Step 3:

Use Google Patent Search Google Patent Search is a beta service that combines the easy searching of Google with the patent data from the USPTO. That is the true beauty of using Google instead of the USPTO: your search results and patent profiles are significantly cleaner, more readable and easier on the eyes.

SRC: http://www.google.com/patents

As a demonstration, we will run a search for the patent on the electrophotographic copier, or “copy machine.”

http://www.google.com/patents?id=Pp48AAAAEBAJ

As you can see, the page is very helpfully divided up into distinct sections, making it easy for you to find the information you are interested it. You can choose to download the whole patent, view it as an Adobe PDF document, or even click a direct link to the USPTO’s record. On this same page, you can also view the patent’s list of citations, the claims it makes, and the drawings the patent holder accompanied with his patent application. Again, while these things can be found at the USPTO site, those unfamiliar with patent records will waste hours looking for what Google organizes so readily.

There you have it: three simple steps to conducting a patent search. Above all, remember that the more specific your searches are, the more likely you are to find the patent you want – or – the more justification you will have to conclude that no one has your patent, if the search comes up empty. Good luck!

Eric Corl is the Founder and CEO of IdeaBuyer.com, a marketplace for new technology and products that gives inventors the opportunity to showcase their intellectual property to consumer product companies, entrepreneurs, retailers, and manufacturers. You can email him at EricCorl@IdeaBuyer.com. You can visit the site by clicking here > Patents for Sale.

Need Assistance? Call us at 832-683-1527

Royalty Rates Made Easy – The Guide

July 1st, 2014

Royalty Rates Chart

One of the most important steps in licensing a patent or idea is establishing the royalty rate you will receive in return for granting a licensee the right to manufacture and sell your invention. In this article we will explain what royalty rates are, how to calculate the proper royalty rates, elements that effect royalty rates, protections to put in place, and other important things to consider when licensing an idea.

What are Royalties?
Royalties are payments that are provided to a licensor by a licensee in exchange for the right to operate under your idea.

Royalty rates are affected by several criteria:

Criteria Description
Exclusive or Non-Exclusive Exclusive idea licensing will result in a higher royalty rate than non-exclusive licenses.
Upfront Sum The higher the up-front sum being paid to the licensee, the lower royalty rate the licensor will likely receive as it is an element of the overall compensation.
Industry Standard Royalty Rates Each industry tends to have an ‘industry standard’ royalty rate. See the end of this article for a list of industries and their average royalty rates.
Company Standard Rates Companies that have a good amount of experience in licensing ideas tend to have a standard package that they offer inventors. The larger the company is and the bigger their track record, the more leverage they will have in negotiating your royalty rate.
Intellectual Property Stage The further along the intellectual property is to commercialization, the less risk the licensee will face, and the higher the royalty will be paid to the licensor.
Market Potential The royalty rate will heavily depend upon the market potential of the idea you are looking to license. This can be difficult when you are trying to license an invention that is developing a new market or is part of a new market that has not yet shown it’s full potential.
Licensing to an Infringer If a company has been infringing on your idea, you can be entitled to damages, a % of past profits, and typically command a higher royalty rate.
Related Intellectual Property Included Packaged intellectual property can command higher royalty rates.
Testing/Certification If your intellectual property requires testing or certification prior to being brought to market, having these milestones completed will lead to higher royalty rates.
Investment Required All things being equal, the higher the investment required to getting a product to market, the lower the royalty rate that will be paid.

Exclusivity is when a licensor gives a licensee the exclusive right to market and sell a product by intellectual property.

Non-Exclusivity is when an intellectual property holder provides the right to market and sell a product to a licensee but retains the right to license it to others as well.

Exclusivity can be further broken down to regions or specific locations as is the common practice with franchises. The proper route often depends upon how a product will be delivered to the customer, the demand for the intellectual property, and the market size.

Protections for Idea Licensors:

  1. Performance Obligations
  2. Void Agreement
  3. Exclusive to Non-Exclusive

Performance obligations protect an inventor from getting stuck with a dud of a licensee. You will want to include these provisions in your idea licensing agreement that ensure certain milestones are being met. These milestones can be distribution in a number of stores, sales targets, royalty totals, or best efforts being made. If performance obligations are not met, an agreement can direct for a number of actions to occur. Such actions could include but are not limited to a voiding of the agreement, financial compensation, or for the licensee to switch from exclusive to non-exclusive license.

Licensing to a Company Infringing on Your Idea:

Often times, idea licensing takes place after it has become apparent that intellectual property is being infringed upon. This can be a sticky situation given that if the parties do not come to an agreement, it can often end in costly and lengthy litigation. As a note to inventors, it is important to keep in mind the overall short term and long term costs to litigation. While it may seem like a card to play, be careful not to send willing parties away from the table without giving negotiation a good faith effort.

Note:  It is important to note that royalty rates and damages determined by the court are generally higher. However, avoid litigation if you can – it often ends up ‘costing’ you much more than you anticipated.

If you do get into a position where a company that is infringing upon your intellectual property is unwilling to talk or to come to a reasonable agreement, you may want to consider partnering with a idea licensing law firm that may be able to command more respect at the negotiating table.

How to Command Higher Royalty Rates and Upfront Idea Licensing Fees:

These are several factors that lead to higher invention royalty rates.

- High tech invention ideas.
- Inventions that solve costly problems.
- Inventions that provide large benefits.
- Has already met industry testing requirements.
- Has already met industry certification requirements.
- Commitment for purchase orders.
- Existing sales.
- Lack of suitable substitute products/technology.

We will be continually updating this article with information on royalty rates. If you have any questions, feel free to contact us by submitting your contact information here. As always, we ask that you sign up for our newsletter for ongoing tutorials. If you are interested in an outright sale, read our article on Selling a Patent.

Sample Patent Licensing Agreement

June 12th, 2014

Patent Licensing Agreement

Patent licenses can seem confusing or scary. Therefore, one helpful way of clearing up the confusion is to dive right in and examine what a real, actual patent license looks like and consists of. In this article, we’ll look at the most vital elements of a patent license and explain what each section means in plain, non-legalese English.

 

A Sample Patent Licensing Agreement in Plain English

Here is the URL to the full text of the patent license we are referencing: http://contracts.onecle.com/occulogix/brunner.lic.2004.10.25.shtml.

 THIS AGREEMENT (the “Agreement”) is made by and between OccuLogix, Inc.

(formerly Vascular Sciences Corporation), a Delaware Corporation (the

“Licensee”), and Prof. Dr. Richard Brunner (“Brunner”) living in Germany and

listed as inventor along with Prof. Dr. Helmut Borberg (“Borberg”) in US patentapplication 09/000,917, which is the parent application of US letters patent 6,245,038 issued June 12, 2001 (the “Patent”).

 

This is what every patent license starts out with: a clear identification of the people who are making this agreement and who will be bound by what it says. This paragraph names OccuLogix as the “licensee” (the person or entity the patent is being licensed to) and Prof. Dr. Richard Brunner, who is normally called the “licensor.” The licensor is the person or entity who holds the patent and choosing to license it to the licensee. This opening paragraph is the bedrock of any patent license, and vagueness here will only spell problems for later, “high-stakes” clauses like royalty requirements or performance obligations.

1.   Patent Rights. Shall mean any and all of Brunner's rights, title, 
ownership and interests in and to US letters patent 6,245,038 and any and all
inventions, modifications, continuations-in-part, extensions, divisions,
improvements, etc. made by Brunner or his agents, in any and all areas that
relate directly to the Patent, regardless of whether such inventions or
improvements are patentable or may become patented; all inventions,
modifications, continuations-in-part, extensions, divisions, improvements,
etc. shall automatically be incorporated herein without the payment of any
additional fees, royalties or any other compensation or considerations of
any kind.


A vital aspect of patent licenses (and all legal documents) is defining what you mean when you say things like “patent rights.” For this reason, terms that are likely to be used over and over throughout the license are defined early on. In this case, the license defines “patent rights” to basically mean all the rights granted by law to patent holders. It goes on to specifically define the patent in question as patent 6,245,038 and anything created as a result of it. By spelling all of this out up front, in crystal-clear detail, the term “patent rights” will be interpreted without confusion if the agreement ever needs to be enforced.

 

2.   License Grant. Brunner confirms that he has exclusively licensed, 
and does hereby continue to exclusively license, in accordance with the terms set
forth below, unto Licensee, Brunner's entire undivided right, title,
ownership and interest in and to the Patent and the Patent Rights,
throughout the Territory, to be held and enjoyed by Licensee the same as it
would have been held and enjoyed by Brunner if this Patent License and
Royalty Agreement had not been made and entered into. The exclusive license
granted herein also includes an exclusive right for the Licensee to grant
expressly or implicitly, directly or through its subsidiaries or
affiliates, sublicenses to the Patent and the Patent Rights without the
requirement to pay any additional royalty fee or sublicense fee to Brunner,
to end users of the patented method including medical practitioners and
medical clinics.

This clause specifies that the licensee will be receiving a complete, unclouded interest in the patent and the ability to do with it what he sees fit, within the conditions of this license agreement. It means that unless something has been explicitly forbidden of him, he is free to capitalize on the patent in a manner of his own choosing without seeking permission from the owner/licensor of the patent – in this case, Professor Brunner. This prevents Brunner from trying to drag the licensee into court after the fact demanding additional royalties or sublicense fees that are not provided for in the license.

 

5.   Advance Royalty Payments. Licensee agrees to pay Brunner Fifty Thousand
     Dollars ($50,000 USD) annually as an advance and credited against any                
     and  all Royalty Payments paid in accordance with this Agreement. 
Such Advance Royalty Payments shall be non-refundable and be paid to Brunner 
and in equal payments of Twelve Thousand Five-hundred Dollars ($12,500 USD), 
made quarterly, on or before the expiration of Forty-five (45) days after the
reporting close of each prior calendar quarter.

 

This clause begins to define the royalty payments that will change hands – from the OccuLogix to Professor Brunner – as a result of this agreement. Note the unmistakable specificity of the clause. It specifies how much is to be paid ($50,000), in what increments it is to be paid (equal payments of $12,500), and when it will be paid (45 days after the close of each prior calendar quarter.) This is exactly what you want to shoot for in your patent license, as it eliminates any confusion or dispute about the size and frequency of royalty payments.


7.   Sublicense Fee. In instances where Brunner has consented to a 
sublicense t0 the Patent and the Patent Rights from Licensee to a third 
party who is not an end user of the patented method, Licensee agrees to 
pay to Brunner a sublicense fee constituting a non-refundable cash payment 
equal to Twelve-and-a-Half Percent (12,5% in USD) of any: 
     (i)   Upfront cash payment made to Licensee in consideration of the
           sublicense;
 
     (ii)  Sublicense fees received by Licensee in consideration of the
           sublicense;
 
     (iii) Premium over the fair market value of equity investments in
                  Licensee in consideration of the sublicense; and
 
     (iv)  Non-cash consideration received by Licensee from a sublicense in
           consideration of the sublicense, such consideration to include,
           without limitation, equity in other companies and the value of any
           license granted to Licensee.
 

This clause specifies what happens if OccuLogix sublicenses the patent to someone who is not a customer or end user of the patented technology. By clarifying this up-front, the likelihood of any future dispute or litigation arising from sublicensing the patent is dramatically lowered. It is always better to provide for what happens in these scenarios, in writing, instead of waiting to duke it out in court after the fact.



9.   Failure to Pay by Licensee. Should Licensee fail to make any payments as
     required herein, and should the Licensee fail to cure the breach created
     thereby, any and all rights, title and ownership to the License provided 
to the Licensee under this Agreement shall be forfeited and any and all such 
rights, title and ownership to the License shall, upon notice of the
failure to cure the breach, immediately revert to Brunner, and all monies paid 
by Licensee until such date shall be retained by him without forfeiture.

 

To be sure, this patent licensee specified exactly what will occur in the event that a payment is missed or not made. This is also highly advisable for anyone writing their own agreement (which we don’t recommend). Working with a patent attorney with experience in patent licensing can help you protect the downside risks for both parties. This sample patent licensing agreement overview is not legal advice.

10 Greatest Medical Inventions

June 7th, 2014

This infographic takes a look at the 10 Greatest Medical Inventions of the last 50 years. The infographic, created by HealthExecNews.com, does a good job outlining the impact each of these inventions has had on society since being invented. It should serve as a great reminder that our patent infrastructure is in place to help protect and therefore help protect the rewards of great inventions like this. We’ll be taking a deeper look into inventors who have changed the world with their inventions, ranging from everyday consumer products to high tech gadgets that change the way we live.

Greatest-Medical-Inventions

Top Inventions of 2013

January 30th, 2014

Throughout 2013, a multitude of indispensable inventions have been released to alleviate the stresses of any element of our day to day lives. Here is a look at the top inventions of 2103:

1-Automatic

Automatic is a device which you can attach to a car’s onboard computer which displays data about your engine and driving habits to your phone. It uses GPS to map out each trip your have made, remembers where you have parked your vehicle, records gas usage and mileage and presents you with a driving score. If the check engine light appears on your vehicle, Automatic will decipher the code and diagnose exactly what the problem is. Automatic is invaluable if you have a car accident because if your smart phone is on and has a GPS signal, it will automatically notify local authorities and your family members. Automatic is incredibly useful at informing you of the environmental impact of your driving and providing you with precise details of your vehicle, enabling you to drive efficiently and without any worries should any problems occur.

2-Bounce Imaging Explorer

Bounce Imaging Explorer may be the size of a baseball, but it contains six cameras as well as a microphone to transmit audio, a Wi-Fi transmitter and sensors to detect temperature and air quality. The can be thrown into an area which for safety reasons may be deemed inhabitable. The Explorer will then proceed to transmit data about the area via smart phone or tablet. The Explorer was created by Francisco Aquilar who was inspired after the Haiti earthquake in 2010. Whilst the Explorer is still a prototype, its concept could prove pivotal in future years for emergency services and the military.

bounce invention

 

3-Google Glass

This wearable computer may well be the next stage of the smart phone. It offers a video camera, an Internet browser, real-time GPS all in the form of a pair of glasses. Google Glass responds instantly to voice recognition or hand gestures, displaying results in front of your right eye. A mass produced version is predicted to appear on the market in 2014 and only time will tell the extent to which this invention will revolutionise modern society.

4-Proximity Monitoring Systems

Kensington Proximo is an app-enabled system which lets you know where your IPhone and other valuables are at all times. You can even install within your vehicle and it locates the exact parking spot in which you left your car. Proximo ensures you know where your vehicle and other valuables are, granting you complete security over your most prized possessions.

5-CarMD 

It is now possible to purchase a self-diagnosing device for your vehicle to regularly and efficiently check the condition of your vehicle. CarMD notifies you immediately and in precise detail by scanning your vehicle’s microprocessors. It notifies the driver immediately when a problem occurs and proceeds to instruct the driver on possible solutions.

Top Inventions of 2013

6-Hop suitcase

The Hop suitcase is a new design which will follow you around the airport without you having to even touch it. The suitcase uses your smart phone to calculate where you are in relation to the suitcase and follows you accordingly. The days of dragging around heavy suitcases are now a distant memory!

Hop Suitcase that follows you

7-Luci

Luci by Mpowerd is a compact, collapsible solar powered light which you can keep in your car for emergencies, or take with you on outdoor activities as a handy flashlight. It can illuminate up to 15 square feet and a seven hour charge in direct sunlight can generate six to twelve hours of light. Luci was originally designed to aid the developing world, and the company currently operates a Buy-One-Give-One policy where a Luci is donated to a developing community whenever you buy one.

8-Legal Aid App

The Apple Store now offers a variety of apps offering information on where to find legal aid in your area. The National Legal Aid News app provides you with updates about legal aid and related programs across the nation. It offers information state by state, with additional information concerning legal aid for low-income users, for the legal services corporation and will even provide the fifty most recent news stories for any state or category.
 

9-TrakDot Luggage

The perfect solution to lost luggage worries! Simply place TrakDot into your luggage and it will regularly notify you of your luggage’s location via email, text or app. Additionally, you can program TrakDot to notify you when your luggage has arrived at your destination, it can even notify you the moment your luggage is paced on the baggage carousel!

TRAKDOT

10-Keyless Ignition

Keyless ignition allows you to unlock and start your car while your keys are still in your pocket or purse. Each key fob is encoded with a unique sensor, which the vehicle senses in order to unlock and power up the engine. The only thing you have to do is press the power button by the steering wheel! Moreover, all of the key fobs contain personalized and encrypted codes to deter thieves, thus providing both convenience and security.

Author

This article was written by Bradley Taylor, a freelance writer from Derby, England. You can connect with Bradley on Google+ and follow him on Twitter.

Is the Accelerated Patent Process Right for You?

January 1st, 2014

accelerated-patent-processFor those innovators who might not be able to hold out for a two year patent process, the government offers an accelerated patent process.  As of August 2006 the United States Patent and Trademark Office (USPTO) has offered potential patent holders an accelerated examination program that could cut wait times by up to 75 percent.  While this program provides a faster patent, the application process requires the applicant to be more specific and accurate about their invention.

The first patent granted under this new government program was to Brother International, Ltd. for a printer ink gauge.  The application was submitted September 29, 2006 and the patent issued only six months later on March 13, 2007.  This was a quarter of the time usually required to receive a patent.

Accelerated Patent Process Benefits

Jon Dudas, Undersecretary of Commerce for Intellectual Property, said that accelerated examination allows innovators in any technology a patent review and decision within 12 months.  In return for a faster patent decision, the agency expects the applicant to provide a better application and process, Dudas said.

This should be no problem for those with truly innovative ideas and a drive to get results relatively quickly.

According to a press release from the USPTO, “Any invention that is new, useful, non-obvious, and which is accompanied by a written description disclosing how to make and use it can be patented.”  This is no new news to inventors.  Where the requirements differ slightly is that those seeking patents must prove that their idea is new and non-obvious (known as “prior art”) in the accelerated examination application, the press release said.

In the standard patent process, inventors are only required to provide prior art related to their idea of which they are aware.  The USPTO would then do their own search and identify any prior art that would make the invention not patentable.  In the accelerated patent process program, inventors are required to search and provide reference to all prior art with their application.  They also must explain what the prior art taught them and why their invention is different.  This significantly speeds up the patent issuing process for the USPTO.

Are the Benefits Worth It?

Ultimately, the choice one makes about whether or not to use the accelerated patent process depends on the amount of time and work the inventor is willing to put in to applying.  An extremely thorough application is required, as is a better description of the invention and prior, related inventions.  While the process might seem lengthy and overwhelming for some, others might consider it a great opportunity to get a quality patent in less time.

Those considering the accelerated examination program to pursue their patent should definitely research the procedure to ensure that it is right for them.  The USPTO web site has official guidelines and applications available to those interested.

Standard Licensing Agreement Terms

December 25th, 2013

Standard Patent Licensing Terms

Do you feel like you are throwing darts trying to come up with reasonable terms and performance obligations for your patent license agreement? If so, there is no need to panic. Patent licensing is an established field with standardized terms and considerations that you can use as benchmarks. In this article, we will walk you through some of the standard licensing agreement terms and offer tips on applying them to your own unique situation.

The first thing you need to decide is whether your patent license will be an exclusive or non-exclusive license. An excellent article called “Patent Licensing” explains the difference between each type: and which one your licensee is probably going to want:

“A patent license is a waiver by the licensor of the right to exclude the licensee from practicing under the patent rights. Licensees would prefer to obtain an exclusive license if possible. In addition to the commercial disadvantages of a non-exclusive license, a non-exclusive licensee acquires no affirmative rights with respect to the enforcement of the licensed patents. Unless the non-exclusive license specifically provides some protections, the licensor has no duty to protect the non-exclusive licensee’s interests in the event of patent infringement, abandonment of the patent, or other licensee’s with better terms.”

SRC: http://www.zeromillion.com/entrepreneurship/patent-licensing.html

Standard Licensing Agreement Terms to Avoid

Once you have settled the matter of exclusive vs. non-exclusive, you will move on to what performance obligations and requirements get written into the license. There is one clause, however, that you should avoid: the generic “best efforts” clause. The article continues:

“Both parties should avoid this clause in favor of more objective standards. The courts may interpret such a clause to require the dedication of all of the licensee’s resources towards exploitation of the licensed patents, when realistically most licensees will have a number of other significant business endeavors to support.”

Fortunately, there is a better way to ensure that your licensee performs on a high level: specific, numeric performance obligations. The idea is that you want each party’s responsibilities to be crystal clear, unmistakable, so that they can be enforced. For instance:

For example, the licensee may be required to obtain an approved New Drug Application with the Food and Drug Administration by a certain date. Licensees should be aware that there is an implied obligation to exploit the licensed patent on the part of an exclusive licensee.

An obligation like this is very specific. If it is not met, you as the licensor will have the right to revoke the patent if you feel that is warranted. Of course, you will need to tailor the performance obligations in your contract to your own needs and desires. You may decide to give your licensee more relaxed terms, say, if you are close friends or longtime business partners. The choice is really between you and your licensee.

But how should you set those obligations? This is where many patent holders stumble and feel that they are shooting in the dark. Fortunately, it does not have to be this way. There are 2 main benchmarks that you can use in setting performance obligations and royalty requirements.

1)      Your costs up until this point

Whatever you have paid to patent your idea, document it, advertise it, and bring it to life should be factored into what you expect out of your licensing agreement. After all, you want to recoup those costs, and profit some, besides. That’s the whole point of licensing the patent in the first place.

2)      How much you are making from the patent

If you are already capitalizing on the patent, you should aim to replace and exceed that income with your license agreement. For example, let’s say you created a product based on your patent and are earning X dollars a month from it. If you want to grant someone an exclusive license to take the reins and capitalize on your patent, you should be getting X + something from the agreement. Otherwise, why not just keep exploiting your own patent yourself? If you are going to introduce a middleman (the licensee), it had better be worth your while.

Discuss Your Royalty Requirements

The same goes for royalty requirements. This is when you specify “This agreement must provide me with X dollars monthly, annually, or semi-annually, regardless of where it comes from.” Here, too, you want the amount to compensate you for what you have already spent or what you are already earning. The way to avoid the “throwing darts” feeling is to run the numbers and set your royalty requirements based on those.

As you can see, the key to a license agreement based on numbers instead of guesswork is to assess your own unique situation. While the basic framework of patent licenses is standardized (exclusivity, performance obligations, term lengths, etc.), the exact manifestations are up to you and your licensee to hammer out amongst yourselves. Have questions? Contact us.

 

Patent Statistics

December 2nd, 2013

Patent StatisticsIn this article, we share helpful patent statistics from The US Patent Office. The US Patent Office was officially established in 1790, by Article One: Section Eight of the US Constitution. The Establishment of the USPTO was to “promote the progress of science and useful arts, by securing limited times to authors and inventors, the exclusive rights to their respective writings and discoveries.”

On April 10th, 1790, George Washington signed the first Patent Act of The United States into law. The first patent was issued to Samuel Hopkins on July 31st, 1790, for a process of making “potash” which is an ingredient used in fertilizer. Patents of the time were signed off by both the President and the Secretary of State. Soon that proved impractical and the job was assigned to the clerks in the US Department of State. Dr. William Thornton was assigned the job of first clerk of the Department of State in 1802 and given sole responsibility over patent applications on June 1st of 1802, which in effect opened the first US Patent Office. Trademark registration was added to the functions of the USPO in 1881. Now the USPTO has a campus comprised of five main buildings.

Since that time, over 6.3 million patents have been issued and the patent office receives more than 326k patent applications per year. There are over 300 Intellectual Property and patent offices worldwide which WIPO is attempting to organize. Statistics show that over 2 million patent applications were filed worldwide in 2011; that was the largest increase in patent history, showing a 7.8% increase over 2010.

Of the 503,582 patent filings in the US in 2011, roughly 50% were granted. The USPTO has been working with a backlog which holds up the patent process resulting in nearly three years of wait time between filing and the end of pending status. In 2012, the USPTO reduced their backlog from 750K in 2009 to just over 603K which means the office has increased efficiency since the Leahy-Smith America Invents Act (AIA) was signed into law. The AIA represents the most significant change to patent law since 1836, according to David J. Kappos, the Director of the USPTO. The AIA switches the US patent system from “first to invent” to “first inventor to file”, eliminates interference proceedings and develops post grant opposition. AIA was signed into law on September 16, 2011 by President Barack Obama; its central provisions will go into effect on March 16th, 2013.

Whenever an application fails the USPTO it is generally because those filing the application failed to meet one or more of the three main criteria; the most often being whether the invention is obvious. In other words, inventions must be novel or unique from any other, so a can opener is a can opener, unless it is an electric one, or it fits in a pocket, or folds in half. The second criterion is if the invention is obvious based on whatever is already in use. For instance, a motorized bike has already been invented and patented, but if a new design makes it more efficient then the new design may be patented, so long as it is not the obvious result of technology that already exists. Finally, the invention must be useful.

The USPTO has grown from one clerk to over 11,000 employees in 2012. To put that into perspective, we have an elected congress of 435 State Representatives and 100 Senators; the PTO has over 14 times as many employees working as patent examiners. Patent examiners are generally recruited from universities around the country, while trademark examiners must be licensed attorneys. The USPTO is a forerunner of telework with over 7300 employees working from home at least one day per week in the 2012 fiscal year.

Intellectual Ventures holds the most US patents. Intellectual Ventures, a private company with a focus of developing a large patent portfolio, and the licensing those patents to other companies. Their estimated patent portfolio was 15k-20k in 2011, and has been growing with patent deals made this year.

IBM has the distinction of being the corporation awarded the most patents since 1997. The last statistics available from the USPTO showed that IBM still held the number one position in 2010, but that office no longer issues a top ten list.

Of all available data, Kia Silverbrook has received the most patents from the USPTO for utility patents (new inventions) every year since 2007. Kia Silverbrook is from Australia, and considers himself a “serial entrepreneur” having founded companies and developed products in a wide range of areas. Kia Silverbrook is also the most prolific inventor of all time, with a total of 4508 granted US patents as of October 2012. He has 9740 patents or patent applications registered nationally.

According to a report from the USPTO, 97.1% of patents are now filed electronically; up from 71.7% in 2008. The USPTO goal of clearing the oldest patent applications first (COPA) achieved a 99% success rate, with only 32,365 of the original “Tail” or backlogged cases remaining to be worked. The new First Action Interview Pilot Program allows participants to conduct an interview with the examiner as soon as the prior art search has been conducted. This program has resulted in greater efficiency by increasing the ability to prosecute an application; enhancing interaction between the applicant and the examiner, and the resolution of patentability issues through a one-on-one with the examiner.