How does the sale of patents work? How can a patent holder economically exploit its invention? This article seeks to answer this common question, starting with the sale of the patent and then looking at the other possible ways of economically exploiting an invention.
The patent is an exclusive right that allows those who have created an invention to exploit it exclusively, in the State in which the patent has been granted. This right has a duration of twenty years, subject to the annual payment of the corresponding maintenance fees. Once that period has elapsed, the invention falls into the public domain and becomes freely reproducible.
The patent holder has several tools to exploit its right: direct commercialisation of the invention, sale of the patent to third parties, or licensing.
Which rights can be transferred?
In the case of a sale of patents, what is transferred is the ownership of the patent and the economic exploitation rights attached to it, but not the moral rights linked to the invention. These remain with the inventor and are perpetual, inalienable rights of the personality.
How does the sale take place?
The sale of patents can be effected by means of a transfer deed, such as a sale or gift contract, or by way of a contribution to a company. In this way, the holder transfers to a third party all or some of the economic exploitation rights connected to the registered patent, against payment of consideration.
What are the alternatives?
Usufruct
Nothing prevents the holder of the right from granting a usufruct, i.e. a real right, of limited duration, allowing the usufructuary to fully enjoy the patent without altering its economic destination as determined by the holder. Once the term expires, the bare owner regains full ownership of the patent.
Licensing
Holders often license their patents, whether exclusively or non-exclusively. A licence is a permission whereby the licensor, i.e. the owner of the right, allows another party (the licensee) to use the patented invention for pre-agreed purposes and under specific conditions.
Licences may be:
- exclusive: the holder of the right undertakes to license the patent exclusively to a single licensee;
- non-exclusive: nothing prevents the holder from granting licences to several parties;
- sole: only one licensee and the owner have the right to use the patented technology.
Through the licence, the holder retains full ownership of the right, while allowing a third party to use its invention against pre-agreed payments (royalties and/or lump sums).
Pledge
Although pledging a patent is not a very widespread practice, it is provided for by Italian law. Through a pledge, entrepreneurs can raise the funds needed to continue developing and innovating their business.
Strategic alliances
Another option is to set up strategic alliances between companies in order to grant each other cross-licences over their patents (cross-licences). This solution is particularly appreciated by industrial groups where complementary inventions belong to two or more competitors.
When must economic exploitation be recorded?
Article 138 IPC lists a number of acts, relating to IP rights, that must be recorded in the register. Recording has declarative effect, as its purpose is to make the recorded acts enforceable against third parties.
Concluding remarks
The sale of patents is the main channel through which an inventor can economically exploit its right. It is not, however, the only option: it is not necessary to divest oneself of ownership of one's invention in order to exploit it economically.