PPC Patent Licensing & Assignments 2 — Questions and Answers
Question 1: What is a royalty in a patent license agreement?
- Compensation paid by the licensee to the licensor for the right to practice the patent (Correct answer)
- A government fee assessed for maintaining patent rights in force
- A penalty imposed by the USPTO for late filing of documents
- A one-time payment that automatically transfers patent ownership
Correct answer: Compensation paid by the licensee to the licensor for the right to practice the patent
A royalty is the ongoing compensation paid by the licensee to the licensor—often as a percentage of net sales or a fixed per-unit fee—in exchange for the right to practice the patented technology.
Question 2: What is a cross-licensing agreement?
- An arrangement in which two parties grant each other licenses to their respective patents (Correct answer)
- An agreement in which a single patent is co-owned and jointly licensed by two companies
- A government-mandated licensing arrangement imposed by the USPTO
- A license structure where multiple non-exclusive licensees share a single royalty pool
Correct answer: An arrangement in which two parties grant each other licenses to their respective patents
A cross-licensing agreement is a mutual arrangement where two patent holders grant each other licenses to their respective patents, often used to resolve infringement disputes or enable both parties to operate freely in a technology space.
Question 3: What is a patent pool?
- An arrangement where multiple patent holders aggregate their patents and license them as a package to interested parties (Correct answer)
- A USPTO-maintained database of all issued and pending patents
- A consortium of companies that jointly own a single foundational patent
- A reserve fund established to cover patent maintenance and annuity fees
Correct answer: An arrangement where multiple patent holders aggregate their patents and license them as a package to interested parties
A patent pool aggregates patents from multiple holders into a single licensing package, simplifying licensing for implementers and reducing the risk of royalty stacking in technology-dense industries.
Question 4: What does 'running royalty' mean in a patent license?
- An ongoing royalty calculated as a percentage of sales or per-unit fee based on actual use of the licensed technology (Correct answer)
- A single lump-sum payment made at the time the license is executed
- Royalties paid only during periods when the patent is being actively enforced in litigation
- Annual maintenance fees remitted to the USPTO to keep the patent in force
Correct answer: An ongoing royalty calculated as a percentage of sales or per-unit fee based on actual use of the licensed technology
A running royalty is a periodic payment tied to the licensee's ongoing commercial activity—such as a percentage of net sales—providing the licensor with compensation proportionate to actual use.
Question 5: What did the Bayh-Dole Act primarily establish regarding federally funded inventions?
- It allows universities and small businesses to retain patent rights to inventions arising from federally funded research (Correct answer)
- It requires all patents resulting from federal funding to be licensed royalty-free to the public
- It prohibits exclusive licensing of any patent that received federal research funding
- It mandates open-source licensing for all software patents developed with government grants
Correct answer: It allows universities and small businesses to retain patent rights to inventions arising from federally funded research
The Bayh-Dole Act of 1980 permits universities, nonprofit organizations, and small businesses to elect to retain ownership of inventions made with federal funding, subject to certain government rights including march-in rights.
Question 6: What is the doctrine of patent exhaustion (first sale doctrine)?
- Once a patent owner makes an authorized sale of a patented item, patent rights in that item are exhausted and downstream purchasers may use or resell it freely (Correct answer)
- A patent's enforceability is exhausted after the owner fails to assert it for five consecutive years
- A licensee's royalty obligations are exhausted after a contractually defined payment cap is reached
- Patent rights are exhausted when the patent is licensed to more than ten independent parties
Correct answer: Once a patent owner makes an authorized sale of a patented item, patent rights in that item are exhausted and downstream purchasers may use or resell it freely
The doctrine of patent exhaustion holds that an authorized sale of a patented product exhausts the patent owner's rights in that specific item, preventing the owner from controlling downstream use or resale.
Question 7: What is a 'most favored licensee' clause in a patent license?
- A provision guaranteeing the licensee terms at least as favorable as those granted to any other licensee (Correct answer)
- A clause granting the federal government priority licensing rights over all other parties
- A term giving the licensee the first right of refusal on future patents owned by the licensor
- A provision requiring the licensor to continuously offer the lowest possible royalty rate to all parties
Correct answer: A provision guaranteeing the licensee terms at least as favorable as those granted to any other licensee
A 'most favored licensee' clause contractually ensures that if the licensor later grants more favorable terms to another licensee, the current licensee is automatically entitled to those same favorable terms.
PPC Patent Licensing & Assignments 2
What is a royalty in a patent license agreement?