Hi, everyone! I’m J.D. Houvener, your host of the Bold Today Show, where you, the inventor, entrepreneur, or business owner, get your daily dose of inspiration to make the world a better place. I’m glad you’re here.
We’re in part 4 of our five-part series about patent licensing law, diving deep into licensing contracts and helping you think about that end goal as a business owner, as a technologist looking to move your innovation into the marketplace. It’s a big idea, a big goal to keep in mind, and even though you don’t potentially plan to actually take your product all the way to market, having a business plan is important, as we talked about yesterday.
Even doing simple things like identifying who you might like to license your product to, how you might get to that conversation – that’s a business plan. Put that into writing, get something in action you can put behind, set up a timeframe, because if you don’t hold yourself accountable, time will go by. Time is everything when it comes to patent rights. As you know, for utility applications, you only have 20 years from the date of filing as an exclusive owner. For design patents, it’s down to 15 years. So, certainly, time is of the essence, and all that time is possibly time you could actually be getting paid royalties for. So, make sure to move quickly, put a plan in place, and work with your patent attorney to get that license agreement set up.
Today, we’re talking about patent royalties, and it’s interesting to think about in terms of the contract, but how contract law sometimes can override the terms of the patent. There’s a very fascinating case that talks about how, in general, it’s impermissible for a contract to seek royalty for a patent that has already expired. It kind of makes sense, right? A patent that gets expired goes past that 20-year timeline and is no longer enforceable. Courts have, for a long time, said that the underlying royalty contract is no longer valid if the underlying IP rights have expired. That’s the case called Brouillette versus Dies Company. So, take a look at that case. You can look it up on Google, read all about the opinion. It does seem to make logical sense.
Now, this can cause some tricky situations. We’ve mentioned before there are alternative methods to getting paid. For example, if you were not getting monthly or quarterly cash installments for your licensed product, but instead, if you had stock that hadn’t yet been converted and now your patent’s expired, well, you still may have the option to purchase that stock after your patent expires. So, the rules get a little bit more gray in this area in terms of when you can potentially cash in that stock, how long it’ll hold that option. These are types of considerations that can actually be contracted in the first version of the contract way back when you first formed a license agreement.
So, having the ability to, before thinking forward – thinking rather about how it’s going to play out, what the conditions are going to be, way after you start thinking about making the initial royalty, to when you actually receive the last royalty payment – having these things in mind is essential. And that’s what you want to have a partner as a patent attorney working with you as you format a licensing contract.
If you have any questions about receiving royalty payments, the exciting prospect of getting your invention in the hands of a worthy seller or manufacturer that’s already been doing supplying in this industry for a long time, give us a call or set up a 30-minute consultation. You can book that consult yourself by visiting boldpatents.com. There we can do a much more detailed discussion about your specific scenario in confidence and make sure we get you the answers that you need.
I’m your host, J.D. Houvener, owner of the Bold Today Show. It’s been my pleasure talking to you. Have a great day and go big, go bold.