Patent Exploitation – Licenses of Full Rights

In a system governed by the general principle of free competition, the monopoly that a patent grants to its owner represents an exception to this principle, which is intended to enable him to recoup his investment in research.

With this exception, the legislator aims to foster innovation in the common interest and to avoid a market distortion that would imply having it controlled by a few players.

In this sense, the Paris Convention for the Protection of Industrial Property (CUP), precisely in order to avoid such abuses, allows member countries to take the appropriate “legislative measures” to prevent them. In Spain, Art. 90 of Patent Law 24/2015, of 24th July, (hereinafter “Patent Law” or “PL”) establishes that the owner has an obligation to exploit the patented invention, either by himself or by an authorised third party.

When it comes to exploiting a patent, the owner who is unable or unwilling to do so directly has two options: either to assign the patent to a third party or to authorize them to use the subject matter of the invention. Normally, in the latter case, a license contract is signed whereby the licensor authorizes a third party (licensee) to exploit the invention; in this case, no transfer of ownership of the patent takes place.

Such license contracts must be adapted to the specific requirements of the parties in the particular case. Licenses may apply either to a pending patent (an application) or to a patent that has already been granted, and may also refer to a patent in its entirety or be limited to some of the rights conferred by it. Likewise, licenses may be exclusive or non-exclusive, and they can be granted for all or only part of the territory in which the patent is in force.

In the current scenario, with plenty of inventions and patents, the market may resemble a jungle in which supply and demand do not always meet, thus making it difficult to comply with the owner’s “obligation to exploit” provided by patent laws.

Aware of this issue, and in an effort to encourage the dissemination of innovation, many countries have devised mechanisms to publicize and facilitate the use of patented inventions. The Spanish Patent Law, for example, provides the so-called “licenses of full rights”, which allow for the public offering of non-exclusive licenses.

Licenses of full rights can be of particular interest to the owner, not only because they mean reducing by half the amount of the annuities to keep the patent in force, but also because they represent an opportunity to make the invention known and thus increase the chances of finding partners who are interested in the patented product.

A patent holder who wishes to offer a license of full rights must declare this in writing to the Spanish Patent and Trademark Office (SPTO). Once the request is accepted, this public offering implies that any person is entitled to use the invention as a non-exclusive licensee.

By their very nature, licenses of full rights are incompatible with exclusive licenses and obviously cannot be publicly offered if an exclusive license is recorded in the SPTO Patent Register.

Those interested in exploiting an invention on the basis of a license of full rights must notify it to the SPTO and also specify which use will be made of it. The licensor and the licensee will then have one month to agree on the amount of the compensation to be paid by the latter. If there is no agreement after this period, the amount will be fixed by the SPTO provided it has been requested to do so by one of the parties. The amount fixed may not be changed for one year after the last fixing.

Licenses of full rights entail certain obligations for the licensee, such as the duty to inform the licensor on a regular basis about the use of the invention, as well as the obligation to pay the agreed compensation. In case of breach of these obligations, the licensor may grant the licensee additional time for complying and, if not remedied, request cancellation of the license.