Choosing between Licensing and Manufacturing an Invention?

Introduction:

Most of the inventors decide to license their invention to a big organization, meanwhile, other inventors may choose to manufacture their innovation at their own risk. Every decision which the inventor takes has consequences which can be beneficial and some disadvantages also. Both scenarios are having many external factors involved. For e.g. If an inventor decides to manufacture an invention that has complex technology would have substantial resources and skilled manpower to manufacture that. Inventors of such kind of invention may prefer to license or assign that invention to other businesses. So that they can calmly work on further invention and their royalty through licensing also keeps coming. In this article, we will discuss both sides in greater detail.

Licensing an invention:

The meaning of the term "licensing an invention ", inventors giving authorization to one or more entities to produce, utilize, or sell an invention in exchange for a monetary benefit. Inventors retain the ownership of an idea behind that invention and also can have a big influence while drafting the terms and conditions of the agreement. Additionally, an inventor is being paid for the rights which he assigned but also may have receive royalties for each sale that is made or each unit that is formed. Optionally for the, for the more monitory benefit, an investor can also select to give an entity with the exclusive, indefinite right to their invention, or even prefer assignment, which essentially turns the right over to someone else. For licensing an invention, an inventor must get granted a patent on his/her idea.

A variant on a license is an assignment, which everlastingly transmits an inventor's rights in an invention to an assignee. This is typically a sale, whereas licensing an invention is like a rental. One more type of license is indefinite exclusive licenses, which produce the equivalent outcome as an assignment because the license holder obtains the exclusive right to produce and promote the invention for an indistinct time.

Advantages of licensing an invention:

The big advantage of licensing an invention, the licensee assumes all the business costs and risks, from production to advertising to try to prevent people from infringement of the product patents. Rather, depending on the specifications in the contract, the inventor or licensor may require to simply sit at home and receives the royalty checks.

Inventors frequently discover a license attractive because they don’t undertake any further risks in making, emergent, or advertising the invention. The licensee also presumes any charges connected to enforcing patent rights and stopping infringement.

The inventor while licensing the invention, gets sufficient time for further invention.

Disadvantages of licensing an invention:

Monetary benefits are lower for the inventors because the licensee will want to get most of the profits from the invention, based on the expenses and risks that it is undertaking.

Some inventors are sensitively attached to their inventions unwilling to surrender power over them to others.

Advantages of manufacturing an invention:

By manufacturing an invention, inventors may enjoy the procedure of doing business and they may understand the capability to preserve the control over their invention. If the invention demonstrates benefits, the inventor can earn good monetary benefits.

Disadvantages of manufacturing an invention:

Building your own business involves extensive risk also. An investor has to make sure that, they have a strong ground of funding and that they work with trusted people.

Doing an own business is prolonged and might not have an inventor more time to make a new or further invention.

Differences between licensing and manufacturing an invention:

The first major difference is the workload involved in both processes. It cannot be ignored how much pressure of work is needed for building a business booming, but if an inventor select to license the idea and collect royalties simply.

Another big difference between these two alternatives is their success rate. It is indeed probable to gain adequate to live on with either selection, but far more inventors are winning if they manufacture their invention themselves, typically as much as 50 percent. Studies have represented that victorious licensors are closer to just 13 %.

Lastly, manufacturing has an extremely advanced danger and need for investment. If the product is unsuccessful, then there is more at stake if the inventor selects to market the invention themselves. 

Legal provision for restrictions on assignment and licensing an invention :

Restriction for assignment of an invention:

Section 68 of the Patent Act, 1970 provides the preliminary requirements for the assignment of patents.

To authenticate the assignment of an invention, they must be in written and must exemplify all the stipulations governing the party’s duties and rights. The law directed the assignee in whose favor the patent has been assigned partly or wholly. As per the Indian Contract Act 1872, consideration should be specified in any contractual agreement, and some controllers inquire for specific value or consideration to be revealed in the document.

Restriction on the procedure of licensing an invention:

There is no specific legal procedure and restrictions under the Patent Act, 1970 for licensing inventions. If the agreement for a license is in written form and contains all the required stipulations governing parties' duties and rights, then the agreement is considered as valid and eligible to enforceable under the Patent Act, 1970 once it has been registered in the patent register by the Controller of patents.

Nevertheless, the court retains the caution to go ahead with the claim even if the license has not been registered at the patent office.

Sergi Transformer Explosion Prevention Technologies Pvt Ltd & Ors. v Kumar Pratap Anil & Ors.

In this case, the Honorable Delhi High Court held that procedures in an action for patent infringement by a special license holder can continue at the court's prudence if the application of licensee for the recording of its sole license is not done and yet to register.

Below restrictive conditions should be ignored while writing stipulations of the agreement for a license.

1. To need the licensee to obtain or to prevent the licensee from obtaining any article other than a patented article from anyone other than licensor or their authorized nominees.

2. To prevent and limit the licensee from utilizing any article other than a patented article or one prepared by the process that was patented, which is not supplied by the licensor and their authorized nominees

3. To prevent and limit the licensee from utilizing any process other than the process that was patented.

4. To supply sole authorization back, or the deterrence of dispute to the validity of the patent and coercive package licensing (means putting pressure on the licensee to take license for a patent even if it's not needed by the licensee.

Conclusion:

By analyzing the advantages and disadvantages of licensing and manufacturing of an invention, an investor must decide which one is more beneficial for them. Also, Indian Patent Law, 1870 not put any restrictive procedure to licensing and assignment of invention.

While taking the decision, what should exactly do with an invention, an inventor must take the below considerations into account.

• What is it you like? Are you a creator or a commerce person?

• How much of a danger are you ready to acquire?

• Is it feasible for you to lift up sufficient finances to launch a company?

• Are you up to the job of administration of workers, final sales, taking concern of managerial obligations, and otherwise sustaining in an industry?

Finally, the last call for this decision is for an inventor only.

know more about patents law in India, see the video below-

BY-

Sushama Dilip Mhasurle