Patent licenses explained: silent cross licenses, patent pools, standards essential patents, exclusive vs non-exclusive.

LOVELAND, COLORADO, US, March 10, 2022 /EINPresswire.com/ -- BlueIron's Explainer on How Patent Licensing Works: The “grownups” use licenses.

Big companies use their patent rights in a completely different way than startups. There were 3,300,000 enforceable patents in the US in 2020, but only a paltry 4000 patent lawsuits. Yet, large entity patent owners (those with more than 500 employees) file a lion’s share of all patents. Why would a company spend $50,000 each on hundreds of patents a year? The biggest use of patents is not going to court to litigate against an infringer. It is patent licensing.
Usually, it is some form of cross licensing. Cross licensing comes in several different flavors: the “silent cross-license,” an explicit cross-license, and patent pools.

Silent cross-license

A “silent cross-license” is a patent license where two intellectual property owners each have patents that the other infringes. But neither one wants to begin Mutual Assured Destruction with a giant lawsuit.
Silent cross-licenses happen when two fierce rivals are not willing to talk with each other, but mostly they occur because the patent owners want to avoid anti-trust issues.

An anti-trust problem can happen when two companies appear to be colluding. Let’s say there are two major players who dominate the market. Any licensing agreement to cross-license their IP would be seen as colluding, triggering an anti-trust issue. The anti-trust issue is that a much smaller third competitor would not have access to the IP of the big, dominant players. A good patent strategy for a silent cross-license is to write a lot of patents. The more ammunition you have, the better.

Explicit cross-license

An explicit cross-license is a form of patent licensing where two patent owners with complementary patents agree to terms. They may agree to a no-cost cross patent license, where money never changes hands. This form of patent licensing agreement is never an exclusive license. It is always a nonexclusive license.

In most cases, one of the companies brings a bigger stack of patents to the table than the other. The company who has the smaller stack of patents winds up paying a license fee. The company with the larger stack of patents gets paid.
The patent strategy for any explicit cross-license is to write a lot of patents. At first glance, the sheer number of patents is important, at least for the initial posturing.

Joint venture agreements and patent licenses

Patent licensing is a big part of joint venture agreements. In a joint venture, there is a shared business arrangement where both companies take part in building a specific technology or business. As part of the joint venture, both companies contribute their IP.

Usually, there is a strategic element of the joint venture, where the patent owners are agreeing to develop additional intellectual property, or they are doing a joint marketing/sales venture.

Patent pools

Patent pools are the Holy Grail of patent licensing. A patent pool is an organized body that collects patents from several licensors or patent owners. The pool then licenses these patents to others, known as the licensees.
A license agreement under a patent pool is typically under Fair Reasonable and Non-Discriminatory (“FRAND”) basis. This type of patent licensing allows anyone to have access.

Patent pools are one of the most sophisticated ways to grant licenses. The pool managers identify a group of patents, which may be owned by several companies. In exchange, a licensee gets the freedom to make or sell products using those patents.

Patent insurance is essential for licensing.

The same way your health insurance gives you access to the best doctors and every procedure under the sun, patent enforcement insurance gives you access to the court system to resolve a patent dispute.

Note that patent lawsuits are usually just the opening salvo in a negotiation, although it used to be the last resort. Patent insurance makes sure that the infringer takes you seriously – that you have the means to defend yourself. Once they know you have that ability, you are negotiating as equals.

Russell Krajec
BlueIron, LLC
+1 970-776-4355
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