Tuesday, May 28, 2013
What's the Right Patent Royalty?
The trademark licenses. When a company wants to license trademarks and patents, it's not unreasonable to set separate royalty rates for the trademarks. That way, if the trademark goodwill outlives the life of the patent -- for example, as with a product such as Scotchgard -- the trademark owner will still receive revenues, despite the lack of patent protection.
Two tiers. In previous entries and in our licensing book, we have suggested a two-tiered royalty for patent-pending products: one rate if the invention acquires patent protection; the other rate if the USPTO won't issue a patent. This often works when a product's success is tied to a first-to-market strategy.
Will your NDA protect you? If the company wants a single royalty -- they're saying that they will only license the product if the patent is granted -- then you need to re-group. If the product doesn't get a patent and it still has commercial potential, can the company go ahead with production and cut you out of the picture? Will your NDA protect you if, during the patent process, your patent is published as typically happens after 18 month -- and it's no longer a trade secret? Does your NDA prohibit the company from selling your product if it doesn't enter into a licensing deal? These are issues where an attorney's analysis may prove helpful.