Difference between a patent license agreement and a patent assignment agreement

A patent is an exclusive right granted to the owner of the inventor to manufacture, use, exploit the patented product or process for a limited period by the government. When a patent holder cannot exploit his rights, he seeks to license or assign the patent to a third party. In India, the provisions regarding licensing or assigning of a patent are governed by the Indian Patent Act, 1970.

The Indian Contract Act defines an agreement as every promise or set of promises between two parties. In other words, an agreement is a document containing the parties' understanding in respect of a particular subject matter. The Patents Act 1970 states that a patent owner may license or assign his rights to a third party. However, an assignment or license must be reduced in writing and registered for such rights to be valid. Therefore, it can be said that unless the parties enter into a patent license agreement or a patent assignment agreement, such license or assignment shall not be valid. 

What is a Patent License Agreement?

A licensing agreement is an agreement/ arrangement between a patent holder (i.e., the licensor) and a third party who is authorized to use the rights granted to a patentee (in part or whole) (i.e., the licensee) in exchange for a mutually agreed payment (i.e., a royalty). Patent licensing agreements may be of the following types: (i) an exclusive license agreement; or (ii) a non-exclusive license agreement.
An exclusive license is an agreement that excludes all other persons, including the patent holder, from exploiting the invention. Section 2(f) of the Act defines an exclusive license in similar terms. 
Whereas a non-exclusive licensing agreement means an agreement where the licensee has the right to exploit such an invention but not to the exclusion of the others. The patent holder under this arrangement may exploit the invention himself or give such rights to various third parties. 

What is a Patent Assignment Agreement?

An assignment agreement is an arrangement between the patent holder (the assignor), and a third party (the assignee) wherein the assignor sells or transfers his property (i.e., the patent) to the assignee for consideration. 
A patentee may assign all or any part of its rights to the assignee. There are two kinds of assignments, namely (i) legal assignment; and (ii) equitable assignment. The assignment of an existing patent where the assignee's name is entered as the patent owner is legal. Whereas, when only certain rights are transferred to the assignee, such assignment is called an equitable assignment. 

Differences between a Patent License Agreement and a Patent Assignment Agreement

The differences between a Patent License Agreement and a Patent Assignment Agreement are as follows: 

  • Patent License Agreement
  • Patent Assignment Agreement

Parties Involved

  • Licensor and Licensee
  • Assignor and Assignee

Type of Interest vested

  • Only certain rights are licensed to the licensee, such as the right to sell or import in respect of the patented invention. Such licensee cannot exercise the other rights available to a patentee and does not become the owner of the rights licensed.
  • Rights available to the patentee are transferred to the assignee. Such transfers may be of partial right. However, in respect of the rights transferred, the assignee becomes the owner.

Nature of Interest 

  • Revocable
  • Generally irrevocable, however, the rights may stand revoked on the occurrence of certain events. 

Rights available under the Act

  • The licensee directly does not have the right to sue for infringement or to sub-license the rights further to a third party, unless otherwise agreed.
  • The assignee has the right to sue for infringement and can also exercise all other rights available to a patent holder.

Consideration Involved

  • Royalties are paid to the licensor every month.
  • Lump-sum fees are paid to the assignor upon execution of the agreement.

Under the Patents Act, the patentee has the right to commercialize the patent through an assignment or license. However, should make such a decision carefully weighing the advantages obtained via such arrangement.

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