The decision of whether or not and when it would be desirable to enter into a licensing agreement is always based on a commercial evaluation. So it is not always easy to be clear about when would be the best time to enter into a licensing agreement. There are advantages to doing it as early as possible during the lifetime of the technology/invention and there are advantages to doing it as late as possible.

It is not necessary to wait until a patent or utility model has been granted before entering into a licensing agreement. How to proceed when the patent or utility model is granted or refused simply needs to be written into the licensing agreement.

It is however advisable that both parties, prior to commencing negotiations, draw up an agreement comprising a non-circumvention agreement, a declaration of intent and a confidentiality agreement, so that both parties are clear about what happens if the patent is refused.

Licensor:
If you are a licensor it could be a good idea to outlicense your IP right if, for example, you are unable to carry your invention through to the market due to lack of time, facilities, resources or the required competencies. It could also be that others are more knowledgeable about the market in a particular country and therefore better able to bring your invention out to the customer. Perhaps your company isn’t using all of its patents or utility models. Instead of leaving them unused, they could be generating extra income in the form of royalties by licensing them to others.

Licensee:
If you are a licensee with e.g. some free production capacity, it could be a good idea to take in new inventions as this will save you the time and money spent on inventing something that others have already invented. This way you can get quicker access to new technology, products and processes, and get production underway faster.

A purchase or sales agreement is an agreement on complete transfer of IP ownership between the owner of a patent utility model and an interested buyer.

There are several situations where it would be a good idea to buy a patent or utility model from another company or owner of a patent or utility model. For example, it could be to be able to fully exploit your current production. If you need access to a particular patent or utility model for your production, it can be an advantage to buy the relevant patent from another company (which of course must be willing to sell).

There may also be situations where you want to avoid using resources on developing something that has already been developed by others. In this case, buying a patent or a utility model will save you money as you won’t be spending time and money on research and developing something which has already been invented.

It could be a good idea to sell your patent or utility model when you no longer need it in your own production. Instead of simply surrendering your patent or utility model by non-payment of fees, you ought first to try and find out if you can earn money on the right by selling it to another company. You can also consider whether it would be a good idea to license out your patent or utility model.

It could also be that you don’t have the resources necessary to bringing the technology in the patent or utility model all the way to the market. In this case it could also be an option to sell the patent or utility model to a company who is able to bring the technology/product all the way to the market. Here too you can give consideration to licensing out your patent or utility model.

Valuing a patent or a utility model is a complicated discipline. Therefore we recommend that you obtain professional advice, e.g. solicitors specialized in the area, accountants and other advisors. Below is some information on the things you should consider.

There are two aspects to assessing the value of a patent or utility model: the validity and market potential of the patent/utility model.

Validity
When buying or selling patents it is usual to perform a “patent due diligence”. Here a professional advisor will examine, among other things, whether there is any prior art that can challenge the patent. This is relevant to assessing the possibility of oppositions filed against the patent, requests for re-examinations or claims that the patent is infringing the patents of others in the event these patents are in use. Due diligence can also incorporate an examination to see if the patent is strong in its technological field or whether there are plenty of alternative technology. It is also worth considering whether the claims of the patent are providing the necessary (broad) protection or whether they are easy to get around.

Market potential
When you are assessing the value of a patent’s market potential, your perspective needs to be from a business plan perspective. I.e. analysing how much a patent or utility model will increase the earnings on a product, its potential share of the market and what it will cost to market or manufacture the product.

It is also important to find out whether the patent is keeping up with current standards and regulations, e.g. areas such as mobile phones and pharmaceuticals. Alternatively, it is also worth considering whether the patent has the potential to define a new future standard.

You can get help with valuing a patent’s market potential – see the list of professional advisors.

The same considerations apply to valuing a utility as they do to valuing a patent. A utility model however has a shorter period of validity, i.e. 10 years instead of 20 years for a patent. It is also important to know that in Denmark an application filed for a utility model is not automatically examined for novelty or inventive step, though in Denmark it is possible to request a search and examination to establish these.

Not all countries have a utility model system. Follow this link to see which countries register utility models..