What are the key components of a licensing agreement?
The thing that kind of distinguishes a license agreement is the fact that there is going to be royalties, and so you need to think through carefully what it is that your royalty is being paid on. Is it the incremental value that the patent adds to a product, or is it the entire product? And so a lot of times it’s based on a percentage of the product. So you have to determine what the product is. And then other things you need to consider in a licensing agreement is who if there are any patents that are still alive, who does the … who controls the prosecution of continuing to obtain patents? And then the other thing is, if an infringer is spotted, who has responsibility for enforcing it? Is that the licensor or the licensee? And a lot of times that’s simply dictated by who has the most muscle. If you’re a small entity that is licensing, you’d want that responsibility to go to whoever does your licensing through. And a lot of times that’s where it ends you going. It’s the licensee that has, at least initially, responsibility for enforcing the patent.