How (and Why) to Buy a Patent

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Patents are a form of intellectual property (IP), and like other forms of property they can be bought and sold. (They can also be “rented,” in a way, via licensing.)

So why might you want to buy a patent?

First, it’s important to understand what rights a patent gets you – and doesn’t get you.

As the US Patent and Trademark Office (USPTO) explains,

Ownership of a patent gives the patent owner the right to exclude others from making, using, offering for sale, selling, or importing into the United States the invention claimed in the patent. 35 U.S.C. 154(a)(1). Ownership of the patent does not furnish the owner with the right to make, use, offer for sale, sell, or import the claimed invention because there may be other legal considerations precluding same (e.g., existence of another patent owner with a dominant patent, failure to obtain FDA approval of the patented invention, an injunction by a court against making the product of the invention, or a national security related issue).

A company might want to buy a patent because it can’t make or sell a particular product, or use a process, without infringing the rights of the patent owner. In that situation, it’s more common to take a license. But if the license is nonexclusive, then the licensee’s competitors can also make products or use processes covered by the same patent. If a company BUYS a patent, then it can exclude its competitors from doing those things and potentially gain a market advantage.

Another reason to buy a patent is to be able to license the patent rights to others. Patent royalties paid by licensees can pay for the cost of buying a patent and then generate revenues for the rest of the life of the patent.

A company might already be aware of a valuable patent because the patent owner has sued the company – or threatened to sue it – for patent infringement. Or valuable patents might turn up in a patent search when a company tries to patent its own products or processes.

Some companies, called “non-practicing entities,” or NPEs, have a business model based on buying up patents from companies that aren’t using them, and then monetizing them. The sellers may be companies that are going out of business, or companies that simply have technology that isn’t relevant to their current line of business.

NPEs monetize patents by re-selling them, licensing them, and/or suing companies for infringing them.

As Tech Target explains,

A patent troll is one type of non-practicing entity. Patent trolls amass large numbers of patents with the intention of launching patent infringement suits against companies and individuals that they maintain have illegally used some element of something for which they hold the patent. In the United States, the Federal Trade Commission (FTC) uses the term patent assertion entities (PAEs) to distinguish patent trolls from non-practicing entities that have different motives.

As with any asset purchase, it’s important to perform due diligence when buying a patent. Is the purported seller actually the owner of the patent at issue? Are there other “blocking patents” that make it impractical to use the patent on its own? Does the buyer need to acquire other patents owned by the seller to make use of the patent at issue?

Once the patent sale is concluded, the change of ownership must be registered with the USPTO. The assignment of patent rights must be in writing and notarized. It can be filed using the USPTO’s Electronic Patent Assignment System.

Categories: Patents