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Advantages and Disadvantages of Licensing Patents

When a company decides to license its patent, it can face several disadvantages. For example, the licensor may lose significant control over the process and IP. In addition, since the licensee has the right to use the patent, the licensor cannot keep an eye on the licensee’s activities. This could lead to a loss of reputation for the parent firm. To know more about this contact or check on patent licensing attorney Plano TX. Additionally, if the licensee’s new management fails to maintain the quality of the product, that could reflect poorly on the parent organization. Additionally, the licensor may lose confidentiality.


The cost of licensing patents is increasing dramatically as companies struggle to meet ever-increasing demands. For instance, patents are the heart of the Apple/Qualcomm cellular dispute and are now impacting car makers. The automotive industry is mainly cross-licensed, and car makers are buying parts with unknown patent exposure. As a result, they are often dragged into patent litigation. The ETSI 3GPP group that oversees cellular standards is struggling to update its patent policy. Big patent holders are prone to resist any changes, but changes will likely be forced on the industry.

Many SMEs don’t have the experience to license patents successfully. Licensors need to understand the patent landscape to ensure profitable licensing deals. They need to ask questions about how much value their technology has to offer. Licensors must also have a thorough understanding of their value to ensure a successful licensing agreement. If the licensor doesn’t have the experience and expertise to analyze and assess potential risks, licensing may not be worth it.


Patents can be very valuable and may be the source of a significant profit for inventors, but they also carry restrictions that can make licensing them difficult. For example, patentees may be allowed to condition a license on purchasing a particular product, but only if they have enough market power to do so. Likewise, licensees may only sell to a limited number of customers, and their license cannot include selling other goods.

The legal standard for determining whether patents are licensable is not very clear. Some early case law focuses on distinguishing between what is permissible and what is not. For example, in Adams v. Burke, the patent owner was able to limit a licensee’s sales and products in the United States. As a result, a licensee who sells its product to a third party or customer outside the license’s territorial jurisdiction may face a lawsuit for violating the patent.


If you are an investor, you have probably considered the possibility of licensing your patent. This can help you develop, manufacture, and commercialize your invention while minimizing the risks of export taxes. It can also help you increase your business activities by generating revenue through royalty payments. Royalties are often calculated as a percentage of the licensee’s revenues and are paid to you. As a result, the profits of licensing a patent are usually higher than those from selling the invention.

A license agreement often outlines the geographical limitations. Typically, a patent license from the USPTO allows a licensed company to practice the invention only in the U.S., but a license from a foreign company can extend beyond that. The scope of sub-licenses depends on the original license agreement between the inventor and first licensee. Cross-licensing can also occur between licensees when a new product relies on several patented inventions to function correctly.

Limitation of competition

The Clayton Act 1914 section 7 prevents mergers that reduce competition in markets for complex products. A similar provision in the EU Merger Regulation is found in Council Regulation 139/2004. These two regulations also address the conduct of patentees and remedies for patent infringement. However, patent remedies have the potential to be more conscientious and flexible than they are now. For example, a potential remedy is the technology pool. This arrangement facilitates the distribution of technology while limiting the cumulative royalties.

Several implementation firms have entered the market in recent years, including Microsoft with Windows Mobile and Apple with the iPhone. These companies did not have the same portfolio of essential ETSI patents as their competitors. Many of them, however, held an extensive portfolio of non-essential patents. As a result, some of the original players were forced to sell off-patent portfolios to patent assertion entities, thereby decreasing their position in the market for final products.

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