Patent Attorney and Founder
Hi everyone, I’m J.D. Houvener, your host of the Bold Today’s Show, where you, the inventor and entrepreneur, business owner, get your daily dose of inspiration to make the world a better place. We’re here talking about money week, and I want to remind you real briefly, for those of you who might have missed it yesterday, we talked about patent enforceability. When you’re building a business and you want to protect your invention, the number one way to make money is to make sure no one else gets in your industry, and that’s through enforcement. What I forgot to mention was that there are lots of different venues where you can bring your lawsuit. You can take it to federal court, take it to the Patent Trial and Appeal Board, or you can take it to the International Trade Commission (ITC). Those are all different venues that can help you enforce your patent rights and get you different results.
So today, we’re talking about different ways to bring in money if you’re the inventor or even a business, and you want to think about, “Well, let’s not grow a business out of this; we want to build and license our rights to get a royalty.” So, making money through royalties – how does it happen? Well, the number one way is by contracting with at least one other party and giving up part of what you own. Don’t forget, as a patent holder, you have four distinguished rights. You have the right to prevent anyone else in your jurisdiction – let’s just say the United States – from making, using, selling, or importing into the US. As you can license any one of those rights in an exclusive or a non-exclusive manner, it’s important to work with an attorney and a patent license attorney to make sure you structure the deal very favorably to you. You want to make sure you negotiate important terms, such as the term – how long is a license good for? The grant – what is it? One of those four rights are you giving up and in what manner? As I said, whether they’re the exclusive, whether they’re the only manufacturer that can make it or if they’re one of a hundred that can make the same product. Of course, the grant clause, which is your ability to give up those rights and what royalty you receive from that – really important terms to think about in a contract.
There’s a lot more to think about when it comes to licensing law, especially regarding the performance clause under the exclusive contracts. Under license agreements, there are a lot of cases that come up where there are problems that happen. You find a manufacturer or a salesperson you want to license the ability to sell your product. Well, if they’re the only company out there able to sell your product and they fall short, they’ve said, “You know what, we don’t want to sell the product anymore; they move on to the next one.” You want to make sure that contract has teeth that guarantees that if they let it go, you’ve got the ability to pull the license from them. That’s called a performance clause, so it’s another aspect of these license deals that are kind of twisted. You’ve got to be forward-thinking about how they’re gonna function.
Another interesting aspect about patent law in terms of licensing is patent exhaustion. When you’re selling things like software that aren’t quite as tangible, right when it comes to software licensing, you’ve got to consider the fact that someone might use your product without your permission after a sale. So, patent exhaustion means that you no longer have rights once it’s been licensed and purchased. If the person that bought the software can prove that without a doubt there was no condition on that sale, they can do with that software what they will. More to come on patent exhaustion later this week. Lots to learn about licenses, but that’s the number two way to make money in patents. I’m your host J.D. Houvener of the Bold Today’s Show. Thanks for tuning in. Go big, go bold.