While it’s usually preferable to have an attorney draft your licensing agreement, it’s not always necessary. Legal-minded inventors can certainly draft their own patent license agreements with appropriate study and preparation. This article is about books and articles you should read – and precautions you should take – should you choose to do this.
One excellent free article on the subject comes from IPWatchdog.com, and is entitled “Drafting a License Agreement.” Patent attorney Eugene Quinn begins the article by cautioning that while it is okay to draft your own agreement, you should probably have an attorney review it before you use it. The key, Quinn writes, is finding an attorney who will agree to review an agreement that he did not personally create:
“There are some attorneys who will, no doubt, not want to review your work, but there are a number of attorneys that routinely work with independent inventors and understand the need to keep costs down by offering review services, such as reviewing patent applications or reviewing licensing agreements.”
The next thing Quinn encourages do-it-yourself license writers to do is forget about the “template” mentality. There is a myth among intellectual property laymen that there are “standard” contracts for patent licenses that everyone uses. According to Quinn, this is wrong, and attorneys actually roll their eyes when clients ask for standardized or “template” license agreements. While there are standard elements of every agreement, the exact manifestation of those elements is virtually never the same for any two patent licenses. So don’t approach the task by trying to emulate what you believe to be a standard form.
Instead, the far smarter thing to do is focus on the specific clauses – things like performance obligations and royalty requirements – that will go into your unique patent license. IdeaBuyer has a comprehensive article on precisely this subject called “Writing Good Performance Obligations Into Patent Licenses.” Consider that required reading for any do-it-yourself patent licensing.
That said, you do want to at least look over a few sample patent licenses to get an idea of the structural elements they all share. Sample patent licenses can be found in abundance on the Internet, such as this one:
However, Quinn recommends using an encyclopedia of legal forms, such as this one, which he describes in detail in his article:
West has an encyclopedia set called West’s Legal Forms. In the Second Edition it is Volume 25 that relates to patents (I know this because I own that volume myself). There are a number of good sample licenses in the West book. If you find a library that has a good intellectual property section (which is becoming easier given the growth of this field of practice) there will be several smaller encyclopedias dedicated to patent licensing, such as Milgram on Licensing. In most libraries the form books will be in one location and the IP books in another location, so be sure to check both locations.
Many will read this and think “yeah, that’s all well and good but I can probably get the same information from a local bookstore with less fuss.” However, this is often not the case. Many bookstore books on intellectual property are what John T. Read calls “dictionaries not in alphabetical order”. That is, they simply define some basic terminology of the field without laying out a concise sequence of steps for achieving the goal, which, in your case, is writing a patent license on your own. For this reason, you should stick to encyclopedias such as the one referenced by Quinn.
If you cannot or will not use such an encyclopedia, sample forms from universities are the most reliable alternatives. In any event, once you have a sample form to work with, you should adopt a “buffet” mentality. Rather than copying the structure of the patent license verbatim, simply take clauses that seem to match what you are hoping to convey in your agreement.
Using the sample patent license referenced earlier, let’s say you wanted to use this clause in your own license agreement.
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.
According to Quinn, royalty requirements are one of the things do-it-yourself patent license writers should focus on most. So in the case of this clause, you would simply modify it to suit your needs. If your quarterly royalty payments are $50,000, you would just erase the $12,500 currently in that clause and replace it with $50,000. Repeat this process of taking clauses from other agreements and modifying them until you have a complete agreement that covers everything you want it to.
At this point, you are ready to show your agreement to an attorney and have him iron out any of the kinks that might be left. Good luck!
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Eric Corl is the President of Idea Buyer LLC, a new product development company that owns and operates IdeaBuyer.com- The Online Marketplace for Intellectual Property. The site 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.