Licensing a patent simply means that you as the patent owner grant permission to another individual/organisation to make, use, sell, etc. your patented invention. This takes place according to agreed terms and conditions (for example, defining the amount and type of payment to be made by the licensee to the licensor), for a defined purpose, in a defined territory, and for an agreed period of time.

You may wish to grant a license to a third party for many reasons:

1. You may not have the necessary manufacturing facilities, for example, and therefore opts to allow others to make and sell your patented invention in return for “royalty” payments.
2. Alternatively, you may have manufacturing facilities, but you may not be large enough to cover market demand. In this case, you may be interested in licensing the patent to another manufacturer in order to benefit from another income stream.
3. Another possible situation is one in which you wish to concentrate on one geographic market; therefore you may choose to grant a license to another individual/organization, with interests in other geographical markets. Entering into a licensing agreement can help to build a mutually beneficial business relationship.

Unlike selling or transferring a patent to another party, the licensor (i.e. you) continues to have property rights over the patented invention.

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