Index

A
Accountants
for audit process, 226–227, 387
tax advice from, 394, 395
Act of God (force majeure provision), 290–291, 333, 344
Actual controversy, 389
Advance payments
overview, 108
agent commissions applied to, 116
dates for, 384
defined, 208
evaluation of a license agreement presented to you, 371
financial analysis determining royalty rates and, 218–219
license agreement provision for, 261, 280
licensing flexibility reduced by, 108
nonrecoupable, 209
nonrefundable, 208, 209
option payments treated as, 246
and the product pie, 219
recoupable, 208
Advertising
as deduction for net sales royalties, 215
in trade magazines, 118, 138
Agent(s)
overview, 116
attorneys acting as, 126–127
benefits of using, 116–117
commercial potential, the “bag of parts” analysis to determine, 39
commission for, 116, 120–121
commission owed after termination of agreement with, 119, 121, 126
competing invention also represented by, 116
defined, 116
distinguished from employees, 116–117
distinguished from partnership, 23, 116–117
distinguished from scams, 130–131
evaluation of your invention by, 130
fiduciary duty of, 116
finding, 117–118
industry custom to use, 117
letter of intent identifying, 241
no guarantee of a license given by, 117, 121
nondisclosure agreements with, 119
as party to license agreement, 180
payments and statements to, in license agreement, 282
principal, defined, 116
prototypes for, 119
referrals to find, 117–118
royalty rate information from, 217
solicitation difficulties by inventor as reason to use, 117, 134, 136
solicited companies, list of, 119, 126
termination of agreement with, 119, 121, 126
See also Agent agreements; Scams
Agent agreements
overview, 120
alternative dispute provisions, 126
confidentiality provision, 121
defined, 17
disclaimer provision, 121
escrow account for Properties Income, 121
exclusive vs. nonexclusive, 120
expenses of agent, 121
general provisions, 126
impact on licensing, 17
indemnification, 121
introductory material, 120
obligations of agent, 120
obligations of inventor, 120
payments, 120–121
Properties Income, defined, 120
sample Agent Letter Agreement, 122–125
signatures, 126
termination of, royalties owed for licenses after, 119, 121, 126
Agent Letter Agreement, 122–125
Agreements that can affect licensing, avoiding conflicts among
overview, 12, 13
purpose of agreements, identifying, 15
sample Agreement Worksheet, 19
tracking, 18, 19
types of, 15–17
Agreement Worksheet, 19
Alternative dispute resolution
overview, 335
evaluation of a license agreement presented to you, 374
for license agreements, 271–272, 285–286, 336, 337
for option agreements, 245
for oral licenses, 238, 252
See also Arbitration; Mediation
American Intellectual Property Law Association, 402
American Pet Products Association (APPA), 137
Angel investors, 100–102
Anticompetitive rules. See Patent misuse and illegal agreements
Antitrust laws
and continuation in part (CIP) patent, licensing of, 393
patent misuse as subcategory of, 390
spin-off royalties and, 224
See also Patent misuse and illegal agreements
Arbitration
overview, 335
advisory, 335
agent agreements and, 126
attorney consultation on likelihood of winning, 390
attorneys’ fees and, 153
binding, 335
for employment-related ownership disputes, 84
evaluation of a license agreement presented to you, 374
following mediation, 337
foreign license agreements, 153
joint ownership agreement provision for, 110
license agreements provision for, 271, 285–286, 336
licensee objections to, 335, 337
option agreement provision for, 245, 251
private arbitration, 336
pros and cons of, 335
resources on, 336
See also Alternative dispute resolution; Mediation
Articles of manufacture, utility patents and, 48
Asia, marketplace share of, 147
“As provided herein,” defined, 367
Assignment of rights
attorney for, 25
bankruptcy of the licensee and, 326–327
caution against assignment for “promise” of future payments, 25
consent not needed for licensee affiliates or new owners, 273, 288, 343
consent not unreasonably withheld, 273, 288, 343
defined, 9
to employee, 84
evaluation of a license agreement presented to you, 375
joint ownership created by assignment for money, 104
joint ownership created by assignment to a partnership, 104
license agreement provisions for, 189, 273, 288, 333, 342–343
license agreements usually nonassignable/nontransferable, 189
licenses compared to, 9–10
lump sum payment for, 211
mandatory, provisions not applicable to, 343
with no patent or application, 30–31
with patent application, 25, 28–29
patent applied for by assignee, 313
with patent approved, 27
preinvention assignments (employment agreements), 73–75
recording patents with USPTO, 25
spouse signature, 25–26, 104
sublicensing distinguished from, 189
transferring ownership to your business, 21, 25–31
unlimited exclusive licenses as having the same effect as, 9
written, requirement for, 25
Attachments and exhibits provision, 273, 287, 333
evaluation of a license agreement presented to you, 376
“incorporated by reference,” 341–342, 353
See also Exhibits
Attorney(s)
overview, 402
as agents, 126–127
conflicts of interest of, 127, 405
disclosures about patents made to, 33
disclosures made to, confidentiality of (attorney-client privilege), 175
finding and interviewing, 403
firing/switching, 403
foregoing a fee in exchange for percentage of licensing royalties, 127
intellectual property attorneys, about, 402
in law firms, 404
litigator specialists, 402
resources for finding, 399, 402
working with, 403–405
See also Attorney consultations; Attorneys’ fees; Legal research
Attorney consultations
assignments, 25
attorney for, 360
challenges to ownership, 20
for employment-related ownership disputes, 73, 77, 84
for evaluation of a license agreement presented to you, 369
for likelihood of winning in a lawsuit or arbitration, 390
nonprofit corporations, transfer of ownership to, 24
patent applications, 52–53
patent infringements, 20, 316
patent search/written opinion, 302–303
second opinion on assessment of a lawsuit, 390
when letters fail to resolve a dispute, 389–390
Attorneys’ fees
agreement for, 403, 404
American Rule on, 333
arbitration agreements awarding to the victor, 153
awarded to the winner in lawsuits, provision for, 270, 285, 332, 333–335, 374
caution on one-way provisions for, 334
contingency basis, 316, 402
cost for lawsuits, 333
evaluation of a license agreement presented to you, 374
as factor in disputes, 390
fixed-fee basis, 403
hourly, 402, 403
keeping fees down, 403–405
and litigation costs, 405
for patent applications, 53
patent search/written opinion, 302
retainers, 404
waived for percentage of licensing royalties, 127
Audits of license agreements
overview, 387
accountants authorized to conduct, 226–227
attorney or accountant consultation prior to, 387
company representative designated to assist, 227
confidentiality of, 227
contingency auditors, 227
cost of audit paid in disputes, 228, 229, 387
cost of, capping, 387
defined, 226
dispute resolution, 227–229
evaluation of a license agreement presented to you, 372
foreign licenses and, 153
frequency of audits, 226
interest rate for disputes, 227, 228
notice prior to, 226
notification of request for, 387–388
provision in license agreement, 228, 264
royalty statement disputes, 387–388
sample Audit Request Letter, 387–388
termination of license agreement and, 227

B
Bankruptcy
and credit-card borrowing for inventing expenses, 96
of licensee, termination cannot be claimed for, 326–327
of licensor, 327
mandatory assignments under, as not preventable by “nonassignable” provision in license agreement, 189
Bayliss, Trevor, 134
“Best efforts,” defined as term used in contracts, 240–241
“Best of your knowledge,” 303
Boilerplate (miscellaneous) provisions, 332–350
overview, 332–333
attorneys’ fees, awarded to the prevailing party, 270, 285, 332, 333–335
evaluation of a license agreement presented to you, 376–377
force majeure, 290–291, 333, 344
headings, 333, 344
importance of, 332
integration (entire understanding), 272, 287, 332, 340–341, 376
for joint ownership agreement, 110, 114
for nondisclosure agreements, 163, 167
notice, 273, 287, 333, 341, 377
relationships (no joint venture), 273, 287, 333, 342, 377
severability, 332, 340
waiver, 272, 287, 332, 339–340, 376
See also Arbitration; Assignment of rights; Attachments and exhibits provision; Escrow; Governing law (choice of law); Jurisdiction; Mediation
Breaches of license agreements
commercialization requirement as, 316
cure period for, 325–326
incurable breaches, 326
material breaches, defined, 324–325
monitoring each other to determine adherence, 10
termination of agreements for, 10, 316, 324–325
Brokers, to find angel investors, and signs of a scam, 101–102
Building security, 61
Business Development Centers, 102
Business directories, 139
Business forms
overview, 20–21
See also Transferring ownership to your business

C
California
attorneys acting as agents, 126–127
incorporation costs, 24
independent contractors distinguished from employees, 87
preinvention assignments, limits on, 73, 75
Capital, and loan qualification, 99
Capital gains, 394
Challenges to ownership
attorney needed for, 20
former associate claims ownership, 20
licensee challenging validity of, 18
patent infringement, 20
See also Indemnity; Warranties
CIP (continuation in part) patent, licensing of, 393
Claims-made policies, 319
Clean room (independent development), 59
Coinventors, defined, 107
Collateral. See Secured loans
Combination inventions, 49
Commercialization. See Exploitation
“Commercially reasonable efforts,” defined as term, 240–241
“Commercially reasonable quantities,” defined as term, 317
Commercial potential, assessment of
overview, 36–37
avoidance of false hopes, 41
“bag of parts” analysis for price point, 39
caution about scam marketing firms, 41
crowdfunding as no guarantee of, 98
expert opinion, 41
for foreign licensees, 149–151
the funding process and, 91–93
Innovation Center (University of Oregon) factors to consider, 37–39, 92–93
Patent It Yourself factors, 39–40, 92
Small Business Administration tests for, 37
solicitation of your invention and, 136
testing the waters yourself, 40
test marketing, 94
Commercial success, myth that legal rights will guarantee, 58
Composition of matter, utility patents and, 48
Computers
security to maintain trade secrets, 61
semiconductor chip protections, 67
software created after hours, ownership of, 71
Confidentiality
attorney-client privilege, 175
of audits, 227
implied relationships, 170
of license agreement, 268, 284
most favored nations and, 362
signatures in your invention notebook as alternative to nondisclosure agreement, 158
waiver agreements specifically giving up, 156, 170–172
See also Nondisclosure agreements
Connecticut, state ownership of state employees’ inventions, 81
“Considered,” defined, 367
Contingency auditors, 227
Continuation in part (CIP) patent, licensing of, 393
Contract standards, good faith and best efforts, 239–241
Contract Worksheet, 179, 200–203
Co-ownership. See Joint ownership
Copyright Office
mask work registration, 67
as resource, 401
Copyrights
overview, 8, 65
aspects not protected by, 65, 66
business-owned copyrights, length of, 65
cost of registration deducted from royalties, 312–313
derivative works and, 65
emailing or mailing copies of works will not provide protection, 64
employees and, 60, 79
fees, 67
grant backs and, 362
independent contractors and, 79, 80
infringement of, burden of proof for, 68
length of protection, 65, 67
licensee challenging validity of, 18
licensee registers in its name, 313
of mask works (semiconductor chips), 67
nonfunctional features of invention and, 45–46, 65, 66
originality to author as priority in, 48, 65
registration not required, 65, 67
resources, 401
Corporations
angel investors and, 100–101
initial public offerings (IPOs), 100
for investment by family and friends, 99–100
investment via, 108
license agreement signature line for, 289–290
nondisclosure statement signature line for, 167–168
personal guarantees of loans to, 97
Corporations, transferring ownership to your
advantages of, 23–24
agreements for corporation and stock, impact on licensing, 16
assignment of rights, 21, 25–31
joint ownership agreements, authorized signatures, 110
legal requirements for formation of, 24
limited personal liability for business debts and, 21, 24
nonprofit corporations and, 24
piercing the corporate veil, 24
reasons for forming, 21
shareholders in, 23–24
Covenants, defined, 301
See also Warranties
Credit cards, self-financing with, 96
Credit risk modeling (CRM), 99
Credits and returns deduction from net sales, 214, 216
Cross-territory sales, limiting, 193, 259, 278
Crowdsourcing
overview, 97
crowdfunding, 98
crowdinvesting, 98
crowdlending, 98
disclosure as drawback to, 97
success rates of, 98
See also Internet; Online resources
Currency, provision for payment in U.S., 226, 263

D
Death of licensee, “nonassignable” provision in license agreement not applicable in case of, 189
Debts and uncollectible account deductions from net sales, 215
Declaratory action, avoiding, 389
Deductions. See Net sales royalty deductions
Defend Trade Secrets Act (DTSA), 56, 169, 174
Delaware, preinvention assignments, limits on, 74
Deliverables, 293–295
dates for, 384
definition of, 357
delivery and approval, 295, 358, 359
evaluation of a license agreement presented to you, 377
included in grant of rights, 359
new invention rights created during making of, 359–360
schedules and development services, 295, 358
See also Service agreements; Service provisions
Derivative works, copyright and, 65
Design patents
overview, 8, 63
fees for, 66
filing deadline, 64
infringement of, burden of proof for, 67–68
length of protection, 64, 66
length of time required to obtain, 66
nonfunctional features of invention and, 45–46, 63, 64, 66
registration of, 65
standard for obtaining, 64
Disclosure agreements. See Nondisclosure agreements
Disclosure of your invention
overview, 12, 32
to attorneys, 33, 175
employment agreements and requirement for, 72–73, 74
to investors, 102–103
nondisclosure agreements and, 33
public disclosure as ending trade secret protection, 32, 55
public disclosure, loss of patent rights due to, 32, 34, 158
public disclosure, patent rights and prior art requirement exception, 50
of university-employee inventions, 82
See also Confidentiality; Nondisclosure agreement(s)
Disputes
attorney consultation when letters fail, 389–390
attorneys’ fees as factor in, 390
date for resolution, inclusion of, 388
declaratory actions, avoidance of, 389
informal attempts (telephone calls or meetings), 388
negotiation as key to resolving, 388
paper trail, creation of, 388–389
royalty statement errors, 385–388
See also Alternative dispute resolution; Audits of license agreements; Breaches of license agreements; Lawsuits
Distribution chains, and solicitation, 135–136
Divorce, spouse signature to avoid disputes in event of, 104

E
Earnings
as federal employee-inventor, 81
as university employee-inventor, 82, 83
Edison, Thomas, inspiration/perspiration equation of, 42
Emotions, and product presentations, 147
Employment agreements
assignment of innovations, 74
breach by employee, 72
defined, 16
disclosure of inventions, 72–73, 74
employee manual or other guidelines, as legally binding, 72
holdover clause for preinvention assignments, 73
impact on licensing, 16
nondisclosure agreements (NDAs), 174–175
power of attorney, 72, 74
preinvention assignments, 71–75, 82, 83
sample provisions of, 74
See also Employment and invention ownership
Employment and invention ownership
overview, 20, 70–71, 137
attorney for disputes about, 73, 77, 84
copyrights, 60, 79
disputed ownership, resolution of, 84
employed-to-invent doctrine, 75, 77–78
employees distinguished from agents, 116
employees distinguished from independent contractors, 86–87
government employees, 79–81
independent contractors and exceptions to rules for, 75, 79, 80, 81, 86–87
inventions created after hours, 71, 72, 73, 76–77
patentable inventions, 70, 71–79
patents claimed immediately after quitting a job, 73
shop rights (employer right to use without compensation), 70, 77, 78–79, 84
state laws limiting preinvention assignments, 73–75
trademarks, 70
trade secrets, 70, 71–79
transfer of rights to employee, 84–85
university employees, 81–83
See also Employment agreements; Independent contractors
Encyclopedia of Associations, 138
Entire understanding (integration), 272, 287, 332, 340–341, 376
Equipment and Tool Institute (ETI), 138
Escrow
overview, 345
for agents, 121
evaluation of a license agreement presented to you, 376
license agreement provision for, 291, 333, 345–346
miscellaneous (boilerplate) provisions for, 350
sample Escrow Agreement for release of trade secrets, 346–350
EUBusiness, 154
Europe
enforcement of foreign patent rights in, 150
GNP (gross national product), 151
marketplace share of, 147
resources for, 154, 401
time period for nondisclosure agreements, 166
See also Foreign licensees; International patent rights
European Patent Office, 154, 401
Evaluation agreements, and impact on licensing, 17
See also Option agreements
Evaluation of a license agreement presented to you
overview, 368–369
attorney for, 369
checklist for reviewing, 370–377
cover letter for, 379
key provisions, identifying, 369
modification chart, 378
preparation of electronic files for, 368–369
reviewing the provisions, 369–377
strategies for, 368–369
See also Modifications to your license agreement by licensee
Exclusive vs. nonexclusive agent agreements, 120
Exclusive vs. nonexclusive license agreement grant, 186–187, 258, 277
and duty of licensee to market/exploit, 311
unlimited exclusive licenses, 9
Exhibit A section of license agreement, 274, 290
Exhibits
fact sheet as, 236, 251, 252
license agreement as, for option agreement, 245
patent application as, 256
royalty rate as, 290
service agreement as, 353
See also Attachments and exhibits provision
Expenses
spreadsheet for tracking, 94, 95
start-up, 36
See also Fees and costs; Funding; Tax deductions of invention expenses
Exploitation
date of, 267, 283
duty to market, state law on, 311
evaluation of a license agreement presented to you, 373
license agreement provision requiring, 267, 283, 316–317
licensee warranty of, 310–311
refusal by licensee, in order to keep an invention off the market, 311
termination of license agreement for failure to bring to market, 269
territory not exploited, right to terminate due to, 152–153, 194, 270, 326
Export.gov, 154

F
Fact sheet summarizing negotiation, 235–238, 252
Family and friends
investments from, 99–100
loans from, 98–100
for marketing opinion research, 40
Federal laws
attorneys’ fees, award of, 333–334
Bayh-Dole Act (1980), 82
Defend Trade Secrets Act (DTSA), 56, 169, 174
federal contractors and ownership of inventions, 81
federal employees and ownership of inventions, 80–81
independent contractors distinguished from employees, 86–87
Invention Developers law, 129–130
Patent Misuse Amendments, 391
Semiconductor Chip Act, 67
See also Antitrust laws; Patent misuse and illegal agreements; U.S. Patent and Trademark Office (USPTO)
Federal Trade Commission, 129
Federation of International Trade Associations (FITA), 154
Fee deduction, from net sales, 215
Fees and costs
agent representation, 120–121
assignment of patents, 25
costs of producing the invention, importance to licensee, 39, 170
design patents, 66
of foreign patent rights, 148
incorporation, 24
overall patent costs, 148
for patent filing and maintenance, 47, 53, 58, 94, 148, 312–313
prototypes, 94, 119
scams, 128–129, 130
search for patentability, 93
spreadsheet for tracking, 94, 95
test marketing, 94
trade shows, 144, 145
See also Attorneys’ fees
Fictitious business names, 21
Fiduciary duty, of agents, 116
Financial analysis, royalty rates based upon, 218–219
F.O.B. royalties, 225
Force majeure provision, 290–291, 333, 344
“Foregoing,” defined, 367
Foreign licensees
overview, 147–148
cost of patent protections and, 148
infringement, ability to sue for, 150
license agreements with, 152–153
marketability-per-nation analysis, 149–151
no license at all is better than a bad license, 154
prior experience of licensee with U.S. companies, 152
reliability of the licensee, determining, 151–152
resources for, 154, 401
taxes and, 153, 395
terminology, learning about, 154
time limits triggered by U.S. patent filing, 154
See also International patent rights; Territory, license agreement provisions for
Forms
downloads and updates of, 408
editing RTFs, 408
list of forms and interviews available, 409
types of files available, 408
See also specific forms including license agreement form
Forum selection. See Jurisdiction
France, as market, 151
FRANDS (Fair, Reasonable, and Non-Discriminatory terms) for SEP licenses, 190
Freight/shipping deduction from net sales, 216
Friends. See Family and friends
Functional vs. nonfunctional features of invention
overview, 45–47
copyrights and, 45–46, 65, 66
design patents and, 45–46, 63, 64, 66
nonfunctional features, comparison of forms of protection for, 66–68
trademarks and, 45–46, 62, 66
trade secrets and, 45–46, 56–57
utility patents and, 45–46
Fund an Idea, 98
Funding
overview, 91
define your invention in writing and drawings, 91
determining the amount you need, 91–95
miscellaneous expenses, 94
patentability/novelty search, 93
patent application, 94
prototypes, 93–94
spreadsheet for tracking expenses, 94, 95
start-ups and difficulty of getting conventional sources of, 91
test marketing, 94
See also Funding sources; Joint ownership; Tax deductions of invention expenses
Funding Circle, 98
Funding sources
overview, 94
angel investing, 100–102
bank loans, 97, 99
credit cards, 96
crowdsourcing, 97–98
due diligence of funders, 101
loans compared to investments, 95–96
loans from family and friends, 98–100
qualification for loans (the five “Cs” of credit), 99
SBA loans, 98
self-financing, 94
signature loans, 96–97
state SBA-style lending assistance, 102
venture capital, 102–103
See also Funding; Investments; Loans

G
General partnerships. See Partnerships
General provisions. See Boilerplate (miscellaneous) provisions
Germany, as market, 151
Gifts, joint ownership issues and, 106
GMAR (guaranteed minimum annual royalty), 209, 212–214, 219, 222–223, 262, 282
GNP (gross national product), 151
Good-faith and fair dealing, implied covenant of, 239
Google Patent Search, 42, 401
Governing law (choice of law)
distinguished from jurisdiction, 338, 339
evaluation of a license agreement presented to you, 375
for license agreements, 152, 272, 286, 332, 337–338
for nondisclosure agreements, 173
for option agreements, 251
Government
contractors of, and ownership of inventions, 81
employees of, and ownership of inventions, 79–81
enforcement of intellectual property laws not pursued by, 53
Government regulation or review
patent term extensions due to, 50–51
safety tests, 51
Grant back (licensor ownership), 291, 362–363, 376
illegal, 363, 390
See also Improvements to invention
Grant of rights
deliverables included in, 359
evaluation of a license agreement presented to you, 370
exclusive vs. nonexclusive rights, 186–187, 258, 277
improvement ownership rights and, 187, 360
“including but not limited to” language in, 188
intellectual property rights, 186–188
in letter of intent, 241
nonassignable/nontransferable grant, 189
overly broad grants, example of, 188
sublicenses, 186, 189, 191–192, 225, 259, 263, 277, 370
See also Reservation of rights in license agreements; Territory, license agreement provisions for
“Gray marketing” outside licensed territory, 193
Gross revenues, defined, 116
Gross sales, defined, 207
Guaranteed minimum annual royalty (GMAR), 209, 212–214, 219, 222–223, 262, 282

H
Hawaii, small business loans, 102
Headings provision, 333, 344
“Hereinafter referred to,” defined, 367
“Heretofore granted,” defined, 367
Hybrid license royalty, 212, 222, 262, 280–281, 392–393

I
Idaho, forum selection invalid in, 339
Ideas
copyright not protecting, 65
licensing of, 55
Illegal uses, patents not awarded for, 48–49
Illinois, preinvention assignments, limits on, 74, 75
Implied agreements, 34
Implied confidential relationship, 170
Improvements to invention
overview, 357
definition of, 182, 275
evaluation of a license agreement presented to you, 375
grant of rights to, 187, 360
independently created, 360–362
joint ownership agreement provisions for, 110
license agreement language for, 257, 275
licensee making, and ownership question, 187, 362–363
most favored nations/licensee clause, 296, 361–362, 375
new patentable invention created during requested improvements, 359–360
right of first refusal, 296, 360–361, 375
See also Deliverables; Grant back (licensor ownership)
Indemnity
overview, 20, 303
in agent agreements, 121
avoiding provisions in licensee-provided agreements, 305–307
evaluation of a license agreement presented to you, 372
license agreement provisions for, 264–266, 282–283, 305, 311
licensee indemnity, 266, 311
limited to third-party claims against the licensee, 304
in nondisclosure agreements, 172
not addressed in licensee’s agreement, 310
paying for, 282–283, 307–310
qualification of, 304, 307
See also Warranties
Independent contractors
copyrights and, 79, 80
distinguished from employees, 86–87
government contractors, ownership of inventions, 81
nondisclosure agreements with, 174–175
preinvention assignments, state laws limiting are not applicable to, 75
written agreements with, 87
See also Employment and invention ownership
Independent development of inventions
and breach of NDAs, 165–166
and exclusions of confidential information in NDAs, 165–166
as legitimate means of obtaining trade secrets, 59
Independent inventors. See Inventors, independent
Indiegogo, 98
Industry customs and particulars
agents preferred to independent inventors, 117
learning about, prior to solicitation, 135–136
reservation of rights expressly excluding a particular market, 188–189, 259
royalty rates, 217, 219
Industry standards
FRANDS (Fair, Reasonable, and Non-Discriminatory terms) for SEP licenses, 190
standard-essential patents (SEPs), 190
standard-setting organizations (SSOs), 190
Injunctions, as nondisclosure agreement provision, 172–173
Innovation, ordinary, 49
Installation of equipment provision, 292, 355
Insurance
date for proof of, from licensee, 385
evaluation of a license agreement presented to you, 373
for infringement lawsuits, defensive, 315
for infringement lawsuits, offensive, 315, 316
product liability, 268, 283, 317–319, 326
Integration (entire understanding), 272, 287, 332, 340–341, 376
Intellectual Property Owners (IPO), 399
Intellectual property rights
overview, 6–7, 8
analysis of types of rights, prior to licensing, 45–47
attorney specialists in, about, 402
compliance with laws, provision in license agreement, 267, 283, 373
component approach to analysis of types of, 46–47
costs of registration deducted from royalties, 312–313
dates and time periods, tracking of, 383
defined, 45
evaluation of a license agreement presented to you, 372–373
“first to create” as myth in, 48
forms of, overview, 8
hybrid license agreements including, 212, 222, 262, 280–281, 392–393
infringement lawsuits, insurance against, 315, 316
infringement lawsuits, laws on attorneys’ fees for, 333–334
infringement lawsuits, provision for, 314–315
as license agreement provision, generally, 153, 183, 184, 266, 312–315
license agreements made without protection of, 55
licensee registers in its name, 313
notification of, marking products with (e.g. symbols), 313–314
obtaining, resources for, 398–401
tying arrangements and, 391
See also Copyrights; Functional vs. nonfunctional features of invention; Ownership; Patent(s); Trademarks; Trade secrets
International patent rights
and compensation for pendency infringements, 52
cost of, as consideration in obtaining, 148
infringements on, ability to sue, 150
license agreement provision for, 153
Nonpublication Request if international rights not sought, 60
Provisional Patent Application (PPA) and, 54
resources on, 401
time limits for, triggered by U.S. patent filing, 154
See also Foreign licensees
International Trade Association (ITA), 154
International trademark rights, 62
Internet
caution about disclosures of patents on, 34
split territorial licenses as problematic for products sold on, 193
websites, trademarks and, 63
See also Crowdsourcing; Online resources
Introductory material
agent agreements, 120
evaluation of a license agreement presented to you, 370
joint ownership agreements, 109
license agreement provisions, 255–256
Invalidity, in license agreements, 272, 287, 376
Invention(s)
combination, and utility patents, 49
defined, 5
definition of, for letter of intent, 241
definition of, for license agreement, 180–184, 256, 257–258, 275–276
definition of, for option agreement, 246
independent development of, 59
name/nickname of, 256
pioneer, 218
reverse engineering and, 58–59, 167
See also Commercial potential, assessment of; Disclosure of your invention; Funding; Improvements to invention; Intellectual property rights; Inventors, independent; License(s); Nondisclosure agreements (NDAs); Prototypes
Invention Convention, 398
Invention marketing scams. See Scams
Invention promotion companies. See Scams
InventNet, 147
InventorEd.org, 399
Inventor Mentor, 399
Inventors’ associations, 147, 398–399
Inventors, independent
associations for, 147, 398–399
bias/presumptions about, overcoming, 141
industries that prefer agent solicitations vs., 117
personal appearance of, and trade show attendance, 146
treat yourself for a successful license, 382
See also Agent(s); Agreements that can affect licensing, avoiding conflicts among; Inventor’s notebook; Solicitation of potential licensees
Inventor’s notebook
overview of importance and use of, 34, 35
confidentiality agreements created by signatures in, 158
confidentiality agreements for personal market research, 40
date of invention recorded in, 107
tamperproof, 35
tax deductions of invention expenses and, 36
Investments
angel investors, 100–102
crowdinvesting, 98
defined, 95
disclosures to investors (with nondisclosure agreement), 102–103
due diligence of investors, 101
from family and friends, 99–100
joint ownership and, 108
loans as form of, 108
loans compared with, 95–96
venture capitalists (VCs), 102–103
See also Corporations
IRS, employees distinguished from independent contractors, 86–87

J
Joint ownership (co-ownership)
overview, 20, 103–105
acceptance of money, effects of, 106–108
assignment of individual interests by, 104, 105
created by assignment for money, 104
created by assignment to a partnership, 104
created by a will, 104
and revenue splitting, 104, 105, 110
spouse signatures and, 104
See also Joint ownership agreements; Joint ownership created by patented joint invention
Joint ownership agreements
overview, 15–16, 108
alternative dispute resolution, provisions for, 110
authority to sign if representing a partnership or corporation, 110
coinventors, defined, 107
decision making, provisions for, 109
defined, 15
impact on licensing, 16
improvements and revisions to invention, provisions for, 110
introduction section, 109
miscellaneous (boilerplate) provisions, 110, 114
ownership percentage interests, provisions for, 109
revenue splitting law and need for, 105
right to manufacture and sell, provisions for, 109
sample agreement, 111–114
separate agreements for each invention, 109
signatures, 104, 110
transferring ownership to a partnership and, 21, 104, 110
Joint ownership created by patented joint invention
overview, 103
and need for joint ownership agreement, 105
and revenue splitting, 105
See also Joint ownership; Joint ownership agreements
Jurisdiction
overview, 338–339
determined by first person to file a suit, 174
distinguished from governing law, 338, 339
evaluation of a license agreement presented to you, 375
for license agreements, 152, 272, 287, 332, 339
modification by licensee of your agreement on, 367
for nondisclosure agreements, 173–174
for option agreements, 251
states not honoring, 339
strategies for selecting, 339

K
Kansas, preinvention assignments, limits on, 74, 75
Kickstarter, 98
Know-how
defined, 57
nondisclosure agreements and, 57
services agreement for, 57, 355
services provision in license agreement for training, 291–292, 354–355

L
Late payments, 229, 264
evaluation of a license agreement presented to you, 372
Law libraries, and legal research, 399
Lawsuits
attorney consultation on likelihood of winning, 389–390
attorneys’ fees, awarded to the winner in, 270, 285, 332, 333–335, 374
avoidance of threats of, 389
for breach of good faith, 239
for consent to sublicense withheld, 192
declaratory action in case of actual controversy, 389
for false statements about another inventor or invention, 235
FRAND disputes, 190
insurance against, 315, 316
for nondisclosure agreements, breach of, 157, 165–166
for patent infringements, license agreement provision for, 267, 283, 314–315, 373
for patent infringements, money earned via, 58, 315
types the licensee may be involved in, 302–303
See also Alternative dispute resolution; Disputes; Governing law (choice of law); Indemnity; Jurisdiction
Lawyers. See Attorneys
Legal research and law libraries, 399
Legal rights. See Intellectual property rights
Letter Confirming Employee’s Ownership of Intellectual Property Rights, 84–85
Letter of intent
overview, 238
as binding/not binding, 238, 244
date for executing a written contract, 244
fact sheet summarizing negotiations incorporated into, 236
and good faith/best efforts, 244
provisions of, 238, 241, 244
sample, 242–243
See also License agreement(s); Option agreements
Lexis/Nexis database, 140
Liability insurance (product), 268, 283, 317–319, 326
License(s)
overview, 5–6
assignments compared to, 9–10
challenges to ownership that could affect, 18, 20
defined, 5
flexibility of, 7
terminology of, 6
See also Agent(s); Agreements that can affect licensing, avoiding conflicts among; Commercial potential, assessment of; Disclosure of your invention; Intellectual property rights; License agreement(s); Records and record keeping; Solicitation of potential licensees; Transferring ownership to your business
License agreement(s)
overview, 178–179
amendments and modifications of, 179
“business terms” and “term sheet,” defined, 178
caution on promises to fix the agreement later, 341
Contract Worksheet, 179, 200–203
fact sheet as exhibit attached to, 236
fact sheet summarizing negotiations for, 235–238, 252
flexibility of, 7
for foreign licensees, 152–153
“good faith” and “best efforts,” defined as terms, 239–241
hybrid, 212, 222
implied, 34
prior to patent issuance, 54
term (length) of the agreement, defined, 178
without intellectual property protection, 55
written, as strongly recommended, 9
written, licensee wants to proceed without, 236, 238, 252
See also Audits of license agreements; Breaches of license agreements; Disputes; Evaluation of a license agreement presented to you; Letter of intent; License agreement form; License agreement provisions; Modifications to your license agreement by licensee; Negotiation of licenses; Option agreements; Oral license agreements; Patent misuse and illegal agreements; Process of licensing; Records and record keeping; Termination of license agreements
License agreement form, 255–298
definitions of contract terms listed at beginning, 255
editing the RTF, 408
Exhibit A, 274, 290
handwritten modifications, 298
initialing of handwritten changes, 298
language use in modifications, 297
modifications to, 297–298
new sections, adding, 298
online source for, 408
ordering of sections, 298
sample License Agreement, 257–274
signatures, 274, 288–290
word processor, modifications with, 297
See also License agreement provisions
License agreement provisions
advance payments, 261, 280
agent as party to, 180
alternative dispute resolution, 271–272, 285–286
approval of licensed goods, 153
assignability, 189, 273, 288, 333, 342–343
attorneys’ fees and expenses, award of, 270, 285, 332, 333–335, 374
audits, 228
commercialization (exploitation) requirement, 267, 283, 316–317
confidentiality, 268, 284
copyright registration, 183, 257–258, 275–276
date of execution/effective date, 195, 384
definition of the invention, 180–184, 256, 257–258, 275–276
definition of the licensed process, 185, 256, 258, 275–276, 277
definition of the licensed product, 180–181, 184–185, 258, 276
deliverables, 293–295
fee to licensor, nonrefundable and nonrecoupable, 263
force majeure provision (natural disasters), 290–291, 333, 344
governing law (choice of law), 152, 272, 286, 332, 337–338
headings, 333, 344
infringement lawsuits against third parties, 267, 283, 373
installation of equipment, 292, 355
insurance, product liability, 268, 283, 317–319
integration (entire understanding), 272, 287, 332, 340–341, 376
intellectual property laws, compliance with, 267, 283, 373
intellectual property protection, generally, 153, 183, 184, 266, 312–315
intentions of the parties, 256
introduction, 255–256
invalidity, 272, 287, 376
jurisdiction, 152, 272, 287, 332, 339
liability of licensor, limitation of, 266
name/nickname of invention, 256
no patent, 183
notices, 273, 287, 333, 341, 377
parties, identification of, 179–180
patented and nonpatented (but protectable) features, 184, 258, 276
patent is issued, 181–182, 257
patent is pending, 181, 182, 256, 257, 275
payments and statements to licensor, 263, 282, 371
reissues, extensions, continuations, divisions, substitutions to patent, 182, 275
relationships (no joint venture), 273, 287, 333, 342, 377
severability, 332, 340
tech support, 292–293, 356–357
trademark registration, 183–184, 257–258, 275–276
trade secrets, 257–258, 275–276
training of licensee employees, 291–292, 354–355
waiver, 272, 287, 332, 339–340, 376
“whereas” provisions, 256
See also Attachments and exhibits provision; Escrow; Evaluation of a license agreement presented to you; Grant of rights; Improvements to invention; Indemnity; Quality control and samples; Royalty provisions in license agreements; Term (length) of license agreements; Termination of license agreements; Warranties
Licensed process, definition in the license agreement, 185, 256, 258, 275–276, 277
Licensed products
combination products, 185
dates for introduction of, 385
defined, 184
definition in the license agreement, 180–181, 184–185, 258, 276
definition in the option agreement, 246
evaluation of a license agreement presented to you, 370
Licensees
challenging validity of your intellectual property, 18
death of, and assignment of license agreements, 189
defined, 6
purchased by another company, and assignment of license agreements, 189
as the right partner for your endeavor, 136
subsidiary creation by, and assignment of license agreements, 189
See also Licensee’s license agreement; Profits by licensee; Reputation of licensee company; Solicitation of potential licensees
Licensee’s license agreement, overview, 366
Licensing calendar, 383–385
Licensing Executives Society, 399
Licensing Journal, finding an agent through, 118
Licensing memorandums, 142
Licensor, defined, 6
Limited liability
corporations and, 21, 24
limited partnerships and, 23
piercing the corporate veil, 24
Limited partnerships, 23, 25
LLCs (limited liability companies)
assignment of rights to, 25–31
for investment by family and friends, 99–100
license agreement signature line for, 289–290
nondisclosure statement signature line for, 167–168
personal guarantees of loans to, 97
Loans
bank loans, 97, 99
credit cards, 96
crowdlending, 98
defined, 16, 95
due diligence of lenders, 101
from family and friends, 98–100
as form of investment, 108
impact on licensing, 16
investments compared with, 95–96
joint ownership and effects of, 106–108
personal guarantees of, 97
qualification for (credit risk modeling), 99
qualification for (five “Cs” of credit), 99
signature loans, 96–97
Small Business Administration (SBA) loans, 98
written form of, state law requiring, 106
See also Promissory notes; Secured loans
Local governments, development funding through, 102
Lump sum payment for a license (as alternative to royalties), 208–209, 210, 211, 384
Lump sum payment for an assignment, 211

M
Machines, utility patents and, 48
Manual of Patent Examining Procedure (MPEP, USPTO), 55, 400
Manufacturing or outsourcing agreements, and impact on licensing, 16
March-in rights (federal rules for university-owned inventions), 82
Marketability-per-nation analysis, 149–151
Marketability. See Commercial potential, assessment of
Marketing costs as net sales royalty deduction, 215
Marketing scams. See Scams
Mask works, 67
Material breach
commercialization requirement and, 316
defined, 324–325
Mediation
overview, 335, 336
agent agreements and, 126
arbitration following, 337
for employment-related ownership disputes, 84
evaluation of a license agreement presented to you, 374
joint ownership agreement provision for, 110
license agreement provision for, 271, 285–286, 337
option agreement provision for, 245
pros and cons of, 336
See also Alternative dispute resolution; Arbitration
Minimum annual royalty payments, guaranteed (GMAR), 209, 212–214, 219, 222–223, 262, 282
Minnesota, preinvention assignments, limits on, 74, 75
Miscellaneous provisions. See Boilerplate (miscellaneous) provisions
Modifications to your license agreement by licensee
overview, 366
legalese you might encounter in, 367
“most important” approach to, 368
redline/strikeout revisions, 368
stylistic changes, 366
substantive changes, 366
weighing the consequences, 366–367
“yes, no, maybe” approach to, 367
See also Evaluation of a license agreement presented to you
Monitoring license agreements
overview, 12, 382
for breaches of agreement, 10
dates and time periods, tracking of, 383, 384–385
quality control, 395
See also Disputes
Montana, forum selection invalid in, 339
Most favored nations/licensee clause, 296, 361–362, 375

N
National Congress of Inventor Organizations (NCIO), 147, 398
National Inventor Fraud Center, 131
Natural disasters (force majeure) provision, 290–291, 333, 344
NDAs. See Nondisclosure agreement(s)
Negotiation of licenses
overview, 12, 178–179, 232
asking questions vs. making demands, 232
avoiding costly mistakes: the list of “don’ts,” 232, 234
competing inventors, making statements about, 235
Contract Worksheet, 179, 200–203
of disputes, 388
fact sheet summarizing results of, 235–238
personal conduct during, 232, 234
personal meetings as preferable for, 232
real-world example of, 14
record keeping for, 207
reminding the licensee that any deal is subject to approval of the final contract, 207
resources for, 235
“take it or leave it” deal, 234
“turning it over to the lawyers” phase (for drafting/revising), 178
two distinct stages of, 233
the written license contains objectionable items, 233
written license not forthcoming, 236, 238, 252
See also Letter of intent; License agreement(s); Option agreements
Net sales, defined, 207, 214
Net sales royalty
overview, 209–210, 280
defined, 208, 261, 280
generally recommended over lump sum payment, 210
license agreement provisions for, 214, 216, 220–221, 261
net sales, defined, 207, 214, 216
promotional items included in, 220–221, 261
See also Advance payments; Net sales royalty deductions
Net sales royalty deductions
overview, 214–215, 216
cap on, 216
credits and returns, 216
debts and uncollectible accounts, 215
fees, 215
freight/shipping, 216
limit placed on amount of, 216
local taxes, 216
as percentage vs. actual amounts, 216
promotion/marketing/advertising, 215
quantity discounts, 215
sales commission, 215
Newsletters, 138
No joint venture provision, 273, 287, 333, 342, 377
Nondisclosure agreement(s) (NDAs)
overview, 34, 156
for audits, 227
authority to bind the company, checking the signing person for, 158
caution about waiver agreements, 156
company-provided NDA, review of, 159
company unwilling to sign, 158, 168
compare yours with sample agreements in text, 34
defined, 16
and disclosure of inventions, 33
for employees and independent contractors, 174–175
for evaluation agreements, 17
evaluation of a license agreement presented to you, 373
immunity from liability (whistleblower protection for employee/contractors), 174
impact on licensing, 16
implied confidential relationships, 170
with investors, potential, 102
and joint ownership, 107
for know-how, 57
lawsuits claiming damages for breach of, 157, 165–166
licensing memorandums containing, 142
option agreements and, 251
for outsourcing or manufacturing agreements, 17
for personal market research evaluators (logbook approach), 40
prior to product presentations, 140, 146
proceeding without, and methods of guarding rights, 168–170
protection of confidential information a requirement of, 157, 166
record keeping of disclosures, 161
trade secrets protected via, 57, 157–158, 165
for trade-show on-the-spot product presentations, 146
waiver agreements, 156, 170–172
See also Nondisclosure agreement provisions
Nondisclosure agreement provisions
overview, 157, 160
certification of confidentiality of disclosure, 161
company-provided agreements, checking for basic elements of, 159
definition of confidential information, 161, 162
exclusions from confidential information, 162, 165–166
indemnification, 172
injunctions, 172–173
jurisdiction and choice of law, 173–174
miscellaneous (boilerplate), 163, 167
mutual NDA (optional), 160, 166
obligations of the receiving party, 163, 166
one-way NDA, 160–168
One-Way Nondisclosure Agreement (sample), 162–164
oral disclosures not permitted, 161
oral disclosures to be protected by follow-up letter to confirm, 161
parties, 160, 162
signatures, 167–168
summary, 160, 162
time periods, 163, 166–167
Nonfunctional features. See Functional vs. nonfunctional features of invention
Nonobviousness requirement for utility patents, 49–50
Nonprofit corporations, transferring ownership to, 24
Nonrecoupable, defined, 209
Nonrefundable, defined, 209
North Carolina
forum selection invalid in, 339
preinvention assignments, limits on, 74
Notice provisions, 273, 287, 333, 341, 377
Notification of intellectual property on products (e.g. symbols), 313–314
“Notwithstanding,” defined, 367
Novelty requirement for utility patents, 49, 50

O
Occurrence policies, 318
Online resources
agent, finding, 118
angel investors, 101
arbitration, 336
attorneys, finding, 399, 402
business directories, 139
companion page for book, 2
crowdsourcing sites, 98
foreign licensees, 154
form downloads, 408, 409
insurance for pursuit of infringement lawsuits, 315
inventors’ associations, 147
legal research, 399
license exchanges, 138
Nolo’s Legal Encyclopedia, 400
patent searching, 400–401
Provisional Patent Application (PPA) filing, 53
on scams, 131
Small Business Administration (SBA), 98
specific company information on, 140
trade associations, 137–138
trade magazines, 138
trademark applications, 63
trade newsletters, 138
trade shows, 144
updates of book, 2
U.S. Securities and Exchange Commission (SEC), 102–103
See also Crowdsourcing; Internet
Operations provisions, in letter of intent, 241
Option agreements
overview, 236, 244–245
arbitration/dispute resolution, 251
attachment of license agreement to, 246
confidentiality and, 251
defined, 16
definitions of the invention and the licensed products, 246
as exclusive, 246
fact sheet summarizing negotiations incorporated into, 236, 251
and good faith/best efforts, 246
impact on licensing, 16
jurisdiction and choice of law, 251
license agreement attached as exhibit to, 245
licensee does not proceed (“does not exercise its option”), 246, 251
licensee proceeds (“exercises its option”), 245
negotiation of the license agreement following, 245
nonrecoupability and nonrefundability of option payment, 246
option period, 245
payments for option, 246
renewals of, 251
reservation of rights and, 251
and royalties, deduction from, 246
sample Option Agreement, 246–251
See also Evaluation agreements
Oral disclosures, 161
Oral license agreements
overview, 9
alternative dispute resolution provisions for, 238, 252
fact sheet summarizing negotiations as basis of, 236, 252
proof of, as difficult, 9
state laws limiting to one year term, 9
and written agreement not forthcoming, 236, 238, 252
written agreements as preferable to, 9, 34, 252
Ordinary innovation, 49
Ornamentality, defined, 64
Outsourcing or manufacturing agreements, and impact on licensing, 16

P
Partnerships
agreements for, and impact on licensing, 17
defined, 17
license agreement signature line for, 289
nondisclosure statement signature line for, 167–168
Partnerships, transferring ownership to
agent representation distinguished from, 23, 116–117
assignment of rights, 25–31
authorized signatures, 110
creation of, by actions of the parties, 22–23
joint ownership created via, 21, 104, 110
limited partnerships, 23, 25
and personal liability for business debts, 22, 23
tax consequences of, 22
See also Assignment of rights
Patent(s)
continuation in part (CIP), licensing of, 393
“first to file” as priority in, 48, 50
grant backs and, 363
license agreements and, 181–182, 184, 257, 258, 275, 276
licensee challenging validity of, 18
mailing a copy of invention specs to yourself will not provide protection, 64
resources, 400–401
same result accomplished by different/novel method, 42
search for new inventions similar to yours, 383
search for novelty/patentability, 93
search for warranty purposes, 302–303
search patent databases, 42, 53, 400–401
See also Assignment of rights; Design patents; Joint ownership created by patented joint invention; Patent misuse and illegal agreements; Patent pending period; U.S. Patent and Trademark Office (USPTO); Utility patents
Patent infringements
overview, 20, 58
attorney for, 20, 316
insurance for, offensive and defensive, 315, 316
lawsuits against, license agreement provision for, 314–315
money earned via lawsuits for, 58, 315
as ownership challenge, 20
pendency (patent pending) period and, 51–52
and publication of pending application by USPTO, 52, 60
same invention, 20
same invention, licensed without patent protection, 55
similar or equivalent invention, 20
Patent License Exchanges, 399
Patent misuse and illegal agreements
overview, 390
antitrust laws and, 390
grant backs as, 363, 390
hybrid licenses and royalty rate after patent expiration, 212, 392–393
illegal license length, 392
Patent Misuse Amendments, 391
preventing development of competitive products, 394
tie-ins and tie-outs, 392
tying arrangements, 390–392
Patent pending period
hybrid license agreements during, 212, 222
infringement activity not preventable during, 51–52
license agreements during, 54, 181, 182, 256, 257, 275
and Nonpublication Request, 60
and publication of pending patents by the USPTO, 52, 60
and trade secrets, importance of, 32, 34, 60, 171–172
and waiver agreements, 171–172
Payments
of agents, 120–121, 282
caution against assignments for “promise” of future payments, 25
evaluation of a license agreement presented to you, 371
execution of agreements accompanied by, 12
implied confidential relationships depend on expectation of, 170
license agreement provision, 282
lump sum, for a license, 208–209, 210, 211, 384
lump sum, for assignment, 211
for option agreement, 246
in U.S. currency, 226, 263
See also Advance payments; Late payments; Revenues; Royalties
Payment statements, 263, 282, 371
Personal jurisdiction. See Jurisdiction
Per-unit royalty, 208, 210, 262
Per-use royalty, 208
Phone calls for solicitation, 143–144
Pioneer inventions, 218
Pitches. See Product presentations; Solicitation of potential licensees
PPA. See Provisional Patent Application
Principal, defined, 116
See also Agent(s)
Prior art
and public domain as defense against NDA breach, 165–166
and utility patents, 49, 50, 53, 54
Processes, utility patents and, 48
Process of licensing
overview, 10
evaluation of prospective licensees, 12
example of, 13–15
execution (signing) of agreements, 12
meeting prospective licensees, 10, 12
schematic overview of, 11
See also Commercial potential, assessment of; Disclosure of your invention; License agreement(s); Monitoring license agreements; Negotiation of licenses; Records and record keeping; Solicitation of potential licensees; Termination of license agreements
Product pie, 219
Product presentations
advice from a successful inventor, 13–14
agent as performing duties of, 117
appointment for, as goal of solicitation, 142
emotions and, 147
nondisclosure agreements prior to, 140, 146
preparation for, 146–147
prototypes for, and alternatives, 135
Provisional Patent Applications and protection during, 54
at trade shows, on-the-spot, 145–146
written materials as supplement to, 147
See also Solicitation of potential licensees
Product reps. See Agent(s)
Profits by licensee
and deficiency in guaranteed minimum annual royalty, 214
and financial analysis to determine royalty rate, 218–219
25/75 split of, as starting point for royalty rate, 218
Promissory notes
forms for, 100
for loans from family and friends, 100
Promotional items, including in net sales, 220–221, 261
Property
evaluation of a license agreement presented to you, 370
as term in license agreement, 255, 256, 257–258
Proprietary rights. See Intellectual property rights
Prototypes
for agent representation, 119
alternatives to, 135
benefits of developing, 93
as cost in licensing, 93–94, 119, 135
finding a company to build, 135
for product presentations, 135
Provisional Patent Application (PPA)
overview, 53–54
coinventors and, 107
expiration of, 54
and filing date for patent, 50, 53, 54
international patents and, 54
joint ownership and, 107
online filing of, 53
PTO Independent Inventor Resources, 398
Public domain
copyright law not protecting works in, 65
as defense to lawsuit for breach of NDA, 165–166
defined, 45
expired patents as entering, 51

Q
Quality control and samples
evaluation of a license agreement presented to you, 373
monitoring of, 395
provision for, 267, 283, 317
Quantity discount deduction from net sales, 215

R
“Reasonable best efforts,” defined as term, 241
“Reasonable efforts,” defined as term, 240–241
Records and record keeping
agreements that could affect licensing, 18, 19
business notebook and files, 34–35
clean copy of completed license agreement, 383
Contract Worksheet for license agreement, 200–203
date of execution/effective date of license agreements, 195, 384
dates and time periods, tracking of (calendar), 383–385
of disclosures, 161
of negotiation of license agreements, 207
review of signed documents to avoid conflicts, 15, 18
for tax deduction of inventing expenses, 94, 95
written agreements essential, 34, 35
See also Inventor’s notebook; Nondisclosure agreements
Relationships (no joint venture) provision, 273, 287, 333, 342, 377
Renewal of agreements
dates for, 384
initial term with, 198, 260, 323
notice date, 384
option agreements, 251
record keeping of, 18, 19, 384
short term with, based upon sales, 197, 198, 260, 279
Renewal of trademark registration, 62, 383
Representations, defined, 300
See also Warranties
Representation. See Agent(s)
Reputation of licensee company
licensor investigation of, 12
scams and rule enabling evaluation of, 130
and “take it or leave it” deal, 234
and trade secret disclosure without an NDA, 168, 169
Reservation of rights in license agreements, 186, 191, 277–278
evaluation of a license agreement presented to you, 371
expressly excluding a particular market, 188–189, 259
and multiple licensees of same invention, 189, 191
Revenues
gross revenues, defined, 116
joint ownership and splitting of, 104, 105, 110
joint ownership created by acceptance of money, 106–108
from lawsuits for patent infringements, 58, 315
See also Advance payments; Fees and costs; Payments; Royalties; Taxes
Reverse engineering
patents as protected from, 58–59
trade secrets not protected from, 59, 167
Reversion/reversionary rights, 9
Right of first refusal
of invention improvements, 296, 360–361, 375
of new inventions, 361
Royalties
overview, 207, 280
dates for payment of, 385
dates to complain about accuracy of statements, 385
defined, 208
definition of terms used in discussions of, 207–209
evaluation of a license agreement presented to you, 371
fluctuating/sliding rate, 211, 220
FRANDS and “reasonable,” 190
hybrid license royalty, 212, 222, 262, 280–281, 392–393
in letter of intent, 244
lump sum payment as alternative to, 208–209, 210, 211, 384
minimum annual royalty payments, guaranteed (GMAR), 209, 212–214, 219, 222–223, 262, 282
option payments deducted against, 246
per-unit royalty, 208, 210, 262
per-use royalty, 208, 210–211
reduced if patent not issued, 54
spreadsheets for tracking and computing, 207
See also Advance payments; Audits of license agreements; Net sales royalty; Royalty provisions in license agreements; Royalty rates; Royalty statements
Royalty provisions in license agreements
advance payment, 221–222, 280
date for recording sales, 220, 221, 261
in Exhibit A, 290
F.O.B. royalties, 225, 263, 282
guaranteed minimum annual royalty payments, 222–223, 282
hybrid royalty payments, 222
indemnity and fund from, 265–266, 282–283, 308–310
intellectual property registration costs, 312–313
late payments, 229, 264, 372
license fee, 263
net sales, 214, 221, 261
net sales deduction cap, 216
net sales with percentage deduction (vs. actual amount), 216
payment acceptance does not preclude disputes, 226
payment “cure” provision, 225
payment in U.S. currency, 226, 263
payment period, 225–226
promotional items included in net sales, 220–221, 261
royalty rate, 222
for spin-offs, 223, 224, 263, 281
sublicensing revenues, 225, 263
third-party license royalty, 223, 225, 263, 281
See also Royalty rates
Royalty rates
overview, 216–217
based on financial analysis, 218–219
help to obtain basic rate information, 217
industry “standard” (customary), 217, 219
inventor dissatisfaction with, 219–220
license agreement provision for, 222
and term of agreement, shortening of, 220
25/75 split of profits as starting point for, 218
Royalty statements
overview, 385
analysis of, 385–386
attorney or accountant consult about, 387
audits and, 387–388
common problems, 386
confirmation letter to licensee, 386
contact licensee for explanation, 386–387
dates for complaints about, 385, 387
outside references to validate sales numbers, 387
sales figures inaccurate, 386–387
See also Audits

S
Samples and quality control. See Quality control
Savings analysis, royalty rates based on, 218
Scams
overview, 128
angel investors, 101–102
distinguished between an agent and scam artist, 130–131
federal Invention Developer laws against, 129–130, 131
fees and costs, 128–129, 130
Internet attempts to find an agent and probability of encountering, 118
marketing firms, 41
operation of, 128–129
resources on, 131
Secured loans
collateral requirements, 99
defined, 97, 107
rights to your invention as collateral for, as limiting license rights, 107–108
written agreement for, 107
Securities laws, compliance with, 102–103
Security agreements, 107
Semiconductor Chip Act, 67
SEPs (standard-essential patents), 190
Service agreements
overview, 12
determining the need for, vs. service provisions in the license agreement, 352–353
incorporated into the license agreement, 353
for know-how (training), 57, 355
resource for, 353
for tech support, 356
See also Deliverables
Service provisions
overview, 352
dates for, 384
evaluation of a license agreement presented to you, 377
if separate service agreement needed instead of, 352–353
installation of equipment, 292, 355
technical support, 292–293, 356–357
training the licensee’s personnel, 291–292, 354–355
See also Deliverables
Severability, 332, 340
Shareholders, 23–24
Shop rights, 70, 77, 78–79, 84
Signature loans, 96–97
Signatures
agent agreements, 126
assignments, spouse signature, 25–26, 104
authority to bind the company, 110, 158, 167–168, 288–290
editing RTFs, 408
effective date as dependent on, 195
initialing of handwritten changes, 298
in inventor’s notebook, as confidentiality agreement, 158
joint ownership, spouse signatures, 104
license agreements, 274, 288–290
nondisclosure agreements, 167–168
Silva, David, 13–15
Small Business Administration (SBA) loans, 98
Software created after hours, ownership of, 71
Solar Energy Industries Association, 139
Sole proprietorships
license agreement signature line for, 288–289
nondisclosure statement signature line for, 167
Sole proprietorships, transferring ownership to
advantages of, 21–22
name/fictitious business name of, 21–22
no actions required to transfer, 25
personal liability for all debts of, 21
Solicitation of potential licensees
overview, 134, 142
agreement to protect confidentiality required prior to, 140
appointment for formal presentation as goal of, 142
biases of companies against outside submissions, 140–142
commercial potential, realistic assessment of, 136
company, gaining knowledge of specific, 135, 139–140
difficulties with performing, as reason to use an agent, 117, 134, 136
finding companies, 137–139
industry, gaining knowledge of, 135–136
inside contacts within companies, 141, 142
inventors’ associations and, 147
letter writing, 143
licensing memorandums not recommended for independent inventors, 142
methods of making contact, 142–146
no license at all is better than a bad license, 136, 154
phone calls, 143–144
sample letter, 143
trade shows, 144–146
and working within your industry, 137
See also Agent(s); Foreign licensees; Product presentations
South Carolina, forum selection invalid in, 339
Spain, as market, 151
Spin-offs, royalties on, 223, 224
Spouses
assignment signature by, 25–26, 104
joint ownership signature by, 104
Standard-essential patents (SEPs), 190
Standard Industrial Classification (SIC) Code, 139
Standards. See Industry standards
Start-up expenses, tax deductability of, 36
See also Tax deductions of invention expenses
State laws
for attorneys acting as agents, 126–127
attorneys’ fees, award of, 333–334
implied duty of licensee to market/exploit the invention, 311
incorporation, 24
independent contractors distinguished from employees, 87
jurisdiction/forum selection invalid in, 339
limited partnerships, 23
loans required to be in writing, 106
oral agreements, 9
preinvention assignments, limits on, 73–75
state employees and ownership of inventions, 81
trade secrets, 56, 169
usury, 227
See also Governing law (choice of law); Jurisdiction
State lending assistance, 102
Strickler, Yancy, 98
Sublicensing, 186, 189, 191–192, 225, 259, 263, 277
evaluation of a license agreement presented to you, 370
SuperPages.com, 139
Survival of license agreement provisions following termination, 270, 285, 319, 329
evaluation of a license agreement presented to you, 374

T
Tax deductions of invention expenses
overview, 395
business requirement, 103
depreciated expenses, 36, 395
IRS legal basis for, 103
record keeping for, 36, 103
start-up expenses, 36
when the deduction begins, 36
See also Taxes
Taxes
attorney or accountant consultation for, 394, 395
capital gains vs. ordinary income, 394
as deduction against net sales, 216
foreign license agreements and, 153, 395
limited partnerships and, 23
partnerships and, 22
separate service agreements and consequences for, 353
See also Tax deductions of invention expenses
Tech support provision, 292–293, 356–357
Telephone security, 61
Tennessee Valley Authority, as exception to employee-inventor rules, 81
Term (length) of license agreements
overview, 260–261, 278
commencement of (date of execution/effective date), 195, 384
evaluation of a license agreement presented to you, 371
factors to consider in setting length of, 194–195
fixed term without renewal, 197–198, 261, 280, 323
hybrid license royalties and, 212, 392–393
illegal license length, 392
indefinite term, 197, 261, 279
initial term with renewals, 198, 260, 323
in letter of intent, 241
as long as the licensee continues to sell the products, 198–199, 261, 280
for patent term, 196–197, 212, 260, 278–279, 323
renewal date, 384
renewal notice date, 384
shortening, with a view toward renegotiating royalties, 220
short term with renewal rights based upon sales (and exhibit for sales requirement), 197, 198, 260, 279
termination rights as working in conjunction with, 196, 197, 268–269, 284, 323
Termination of license agreements
overview, 196, 284, 322
at-will (licensee option), 269, 285, 324
audit provision following, 227
bankruptcy and, 326–327
for breaches, caution against overbroad provisions, 325
for breaches of agreements, 10, 316, 324–325
cure period to fix breaches, 325–326
date of, 385
effects of (posttermination provision), 270, 285, 327–328, 374
evaluation of a license agreement presented to you, 374
for failure to bring to market (exploit), 269
for fixed term, 323
licensor’s right to, 269–270, 326
record keeping of, 18, 19
return of molds, plans, and related materials, 328, 374
reversion/reversionary rights, 9
sales of products following, 327
sample License Agreement, 268–270
survival of provisions following, 270, 285, 319, 329, 374
term (length) of agreement works in conjunction with, 196, 197, 268–269, 284, 323
for territory not exploited, 152–153, 194, 270, 326
upon the expiration of the last remaining patent, 392
Territory, license agreement provisions for
overview, 192–194, 278
cross-territory sales, limiting, 193, 259, 278
evaluation of a license agreement presented to you, 371
“gray marketing” outside, 193
statement of, 259
territory not exploited, right to terminate as to, 152–153, 194, 270, 326
worldwide territory, 178, 192, 194
Test marketing, 94
Third-party license royalty, 223, 225
Trade associations
defined, 137
foreign, 154
as source of potential licensees for solicitation, 137–138
Trade directories, 139
Trade magazines
advertisements, and finding an agent, 118
advertisements, and finding solicitation sources, 138
for basic royalty rate information, 217
sales figures and charts as reference in, 387
for solicitation sources, 138
Trademark Office. See U.S. Patent and Trademark Office (USPTO)
Trademarks
overview, 8, 61–62
cost of registration deducted from royalties, 312–313
“date of first use” as establishing, 62–63
defined, 61
federal registration, 62–63
fees, 67
first to use in commerce as qualifying for, 48, 62
grant backs and, 362
hybrid licenses and, 393
infringement of, burden of proof for, 68
intent-to-use registrations (reserving), 63
international, 62
length of protection, 62, 67
licensee challenging validity of, 18
licensee registers in its name, 313
monitoring, 383
nonfunctional features of invention and, 45–46, 62, 66
product configuration protected by, 61–62
quality controls in license agreement and maintenance of, 283
registration not required, 62
renewals of registrations, 62, 383
resources on, 63, 401
state registration, 63
symbol for, 62
trade dress protected by, 61
waiver agreements as threat to, 171
websites and, 63
Trade newsletters, 138
Trade secrets
overview, 8, 55–56, 156–157
active management required for, 60–61
companies generally will not steal, 169
company reputation, and disclosures made without an NDA, 168, 169
defined, 55–56
disclosing “around” the secret, 170
disclosures as terminating protection of, 32, 55
disclosures made without an NDA, methods to help guard rights, 168–170
federal law (DTSA) protecting, 56, 169, 174
functional features of invention and, 45–46, 56–57
grant backs and, 362
improper means of obtaining, defined, 56, 169
independent development as legitimate means of obtaining, 59
independent development resulting from disclosure of, 165–166
infringements, proving, 58
know-how as, 57
legitimate means of obtaining, 58–60
length of protection (confidentiality), 58
misappropriation of, defined, 169
nondisclosure agreements to protect, 57, 157–158, 165
nonfunctional features of invention and, 57
patented inventions also protected by, 32, 60
patents compared to, 57–60
pendency (patent pending) period and need for protection of, 32, 34, 60, 171–172
publication of the pending patent by USPTO and loss of protection for, 60
reverse engineering as legitimate means of obtaining, 59, 167
sample escrow agreement for release of, 346–350
security systems and protection of, 61
stamps and signs to mark, 61
state laws and, 56, 169
See also Nondisclosure agreement(s)
Trade shows, 118, 144–146
Training of licensee employees
service agreement for, 57, 355
service provision for, 291–292, 354–355
Transferring ownership to your business
overview, 20–21
assigning rights, 21
nonprofit corporations, 24
See also Corporations, transferring ownership to your; Joint ownership (co-ownership); Partnerships, transferring ownership to; Sole proprietorships, transferring ownership to
Tying arrangements, 390–392

U
Underlying inventions, utility patents and, 48
Uniform Trade Secrets Act (UTSA), 169
United Inventors Association (UIA), 398
University employees, ownership of inventions, 81–83
University of Oregon, Innovation Center factors for commercial potential, 37–39
Unlimited exclusive license, 9
U.S. Department of Commerce
and foreign licensees, 154, 401
SIC Code, 139
website, 154
U.S. Department of Energy, as exception to employee-inventor rules, 81
Usefulness requirement for utility patents, 48–49
U.S. Patent and Trademark Office (USPTO)
address and contact information, 54–55
assignment of patents, recording of, 25
categories of inventions qualifying for utility patent, 48
design patents, 65
patent application, 47
patent searching online, 401
patents legally required to be issued or rejected within 3 years, 51
PTO Independent Inventor Resources, 398
publication of pending applications, Nonpublication Request, 60
publication of pending applications, request for early, 60
publication of pending patent applications, 52, 60
requirements for utility patent, 48–50
resources available, 400
rules and regulations governing, 55
scam complaints and responses must be publicized by, 130
trademark intent-to-use applications, 63
trademark registrations, 63
trademark resources, 401
website, 400
U.S. Postal Service, as exception to employee-inventor rules, 81
USPTO. See U.S. Patent and Trademark Office
U.S. Securities and Exchange Commission (SEC), 102–103
U.S. Small Business Administration (SBA)
foreign licensee assistance by, 154, 401
test for commercial potential of inventions, 37–38
website, 401
U.S. Supreme Court
employed-to-invent doctrine, 75
illegal license lengths for patents, 392
licensees may challenge validity of intellectual property ownership, 18
licensees required to purchase nonstaple goods, 291
and obviousness requirement for utility patents, 49
Utah, preinvention assignments, limits on, 75
Utility patents
overview, 8, 47
application process (prosecution of the patent application), 52–53
applications, assignment of rights sent with, 25, 28–29
applications, licensing prior to issuance of, 54
attorney for, 52–53
categories of inventions qualifying for, 48
claims of, drafting, 51
continuation application, 51
defined, 47
expiration of, and entrance into the public domain, 51
fees and costs, 47, 53, 58, 94, 148, 312–313
filing an application, 47
filing date, expiration of provisional application and, 54
filing date, provisional application’s effect on, 50, 53, 54
“first to file” as priority in, 48, 50
functional features of invention and, 45–46
as “hunting license” to stop infringers, 47
legal deadlines for filing, 53
length of time required to obtain, 53
maintenance fees, 47, 58
name of invention, 256
nonobviousness requirement, 49–50
novelty requirement, 49, 50
prior art as factor in, 49, 50, 53, 54
publication of pending applications by USPTO, 52, 60
resources for, 52, 53
term extensions due to government regulations or review, 50–51
term of, 50–51
trade secrets compared to, 57–60
usefulness requirement, 48–49
See also Patent pending period; Provisional Patent Application (PPA); U.S. Patent and Trademark Office (USPTO)

V
Venture capitalists (VCs), 102–103

W
Waiver, in license agreements, 272, 287, 332, 339–340, 376
Waiver agreements (of confidentiality), 156, 170–172
Warranties
overview, 20, 300–301
“best of your knowledge,” 303
defined, 300–301
evaluation of a license agreement presented to you, 372
guaranteeing ownership, 301
as license agreement provision, 264, 266, 282, 310
noninfringement (without qualification), 302–303
noninfringement (with qualification), 302
not addressed in licensee’s agreement, 310
power and authority (ownership), 301
See also Indemnity; Warranties by licensee
Warranties by licensee
overview, 310
as license agreement provision, 266, 310
to obey the laws, 311
to sell the invention, 310–311
Washington, preinvention assignments, limits on, 75
Websites. See Internet; Online resources
Whistleblower protections in NDAs, 174
Wikipedia, and finding trade associations, 137
Wills, joint ownership created by, 104

Y
Yet2.com, 138, 399