Invention Licensing Agreement

by Mike Marks
Founder of Invention City

The most important thing to have in every licensing agreement

Below is an example of an actual Invention Licensing Agreement. It is offered to give a taste but is not recommended as a template. It considers some but not all of the aspects common to licensing an invention in return for royalty payments. Some things that inventors should find important are not addressed. In particular the agreement below lacks details regarding enforcement and performance that would be helpful if ever needed. Wide variations and permutations to this agreement are possible in both style and substance. Each deal is unique and should be tailored to its own circumstances.

You can learn more about licensing in the following articles:

We strongly recommend that inventors have an experienced adviser prior to entering licensing negotiations. Invention City has 25 years of experience conducting licensing negotiations with corporations big and small. We can provide negotiation assistance and review agreements from a business perspective for both inventors and corporations. Contact mike @ to find out if we can help with your deal.



This agreement is made on (date) by and between XYZ Company, a company having a place of business at (address) ("Company") and Inventor-Name, a resident of (state) living at (location) ("Inventor").

WHEREAS Inventor represents that it is the owner of an (invention description) known as the "Invention Name" having an appearance as illustrated in Exhibit "1" hereto ("Product");

WHEREAS Inventor has asserted that it is the owner of the entire right, title and interest in and to all intellectual property rights in the Product as identified in its application for a patent to the United States Patent and Trademark Office (Application number ________);

WHEREAS Company desires to produce, promote and/or sell products that are similar in construction and appearance to the Product illustrated in Exhibit "1" annexed hereto;

WHEREAS Company has requested an exclusive license to manufacture, distribute and sell the Product and Inventor is willing to grant such a license to Company on the terms set forth herein.

NOW THEREFORE the parties agree as follows:

1. Subject to the terms and conditions of this Agreement, Inventor hereby grants to Company an exclusive right and license to make or cause to be made, use and sell worldwide the Product, which is the subject of utility patent application number _______ filed with the United States Patent and Trademark Office by and on behalf of Inventor (hereinafter "Licensed Products"). The parties agree that any variations of or modifications to the Licensed Product developed by either Company or Inventor shall be included within the definition of Licensed Product and shall be governed by this agreement. It is expressly contemplated by the parties that a modified version of the Licensed Product could serve as a __________. This license shall continue in force throughout the term of any patent that may be issued by the United States Patent and Trademark Office ("USPTO") on application number __________, or throughout the term of any patent that may be issued by the USPTO on any modification or improvement of the Licensed Product, or until the USPTO denies issuance of a patent upon any such application for the Licensed Product or future modifications or improvements to the Licensed Product, from which there is no appeal or the appeal is denied, unless terminated as otherwise provided herein.

2. Company agrees to pay to Inventor and shall pay a royalty at the rate of X percent (X%) of the net selling price, as hereinafter defined, of all Licensed Products, including Licensed Products sold in combination with any other product as part of a package. The net selling price for the purpose of computing royalty shall be the total of all gross sales amounts actually invoiced or shipped, reduced only by: any cash discount which is in fact actually granted to customers which are directly related to their respective purchases of Licensed Products by Company and separately billed and itemized on the invoice to the customer, credits or refunds for returns actually made, and for shipping charges actually paid by Company and separately billed and itemized on the invoice. For the purpose of this Agreement, all Licensed Products shall be considered "sold" on the date when the invoice is sent or when such products are delivered, shipped or mailed, whichever event occurs first. For products sold through direct sales, the Licensed Products shall be considered "sold" on the date when Company receives payment for the product.

3. Company agrees to make the royalty payments without demand, set-off or counterclaim on a quarterly basis for all Licensed Products to be paid by February 1, May 1, August 1 and November 1 of each year during the term of this Agreement. The royalty payments shall be sent to Inventor by Federal Express or other overnight delivery service, at the expense of Inventor. Beginning in calendar year 2010, the minimum annual royalty payment due from Company to Inventor shall be ____ thousand dollars ($_________). If Comany does not remit the minimum annual payment, the license granted to Company shall become non-exclusive to Company, but all other rights and obligations hereunder shall remain the same.

4. Company agrees to keep, and shall keep, true and accurate accounts and records showing the import, manufacture and sale of all Licensed Products sold by or for it in sufficient detail to enable the royalties paid hereunder to be determined and shall furnish to Inventor at the time each royalty payment is due, a true written statement showing the quantities of Licensed Products sold by or for Company during the period for which the royalty payment is due, the net selling prices of the Licensed Product and the royalties due thereon. The records will be available for inspection and may be inspected by a representative designated in writing by Inventor, during regular business hours on reasonable notice for the purpose of verifying the accuracy and completeness of said written statements and the royalty payments made or due hereunder. It is agreed that the representative making such inspection shall agree in writing not to divulge any information with respect to the business of Company other than with respect to the accounting under this Agreement. Inventor shall provide to Company a full copy of its designated representative's written agreement before any such inspection of its business records is made. Adjustments shall be made in the quarterly statements and the royalties paid therewith for all Licensed Products previously reported as sold and for which royalties had been paid, but which product subsequently had been returned for credit. Inventor shall be limited to not more than one inspection during any quarter.

5. In the event of any dispute between the parties regarding the payment or computation of royalties, Company shall, upon request, produce to Inventor such audited or unaudited records as may reasonably be necessary to verify the information in the Royalty Report, and shall meet with Inventor or its representatives in an effort to resolve such dispute. In the event the parties are unable to resolve such dispute, Inventor may, at its discretion, have a mutually acceptable Certified Public Accountant other than the auditors used by the parties conduct an audit for the Term of this Agreement in dispute, or for any reasonable period following termination of the Agreement for any reason whatsoever. Such audit shall be made with particular reference to all applicable terms of this Agreement, shall determine the total amount of Licensed Products sold, and the total royalties due during the term of this Agreement in dispute or any renewal hereof or other applicable period. The cost of any such audit shall be borne by Inventor unless such audit discloses that Company has underpaid royalties due hereunder by more than five percent (5%), in which case the cost of such audit shall be borne by Company and Company will promptly pay to Inventor double the amount of the discrepancy. The determination of such Certified Public Accountant as to the correct computation of royalties shall be binding on both parties. If audits reveal a shortfall of five percent (5%) or greater more than one time, such shall be considered an incurable default by Company and Inventor may immediately unilaterally cancel this Agreement without penalty.

6. Company agrees to plainly and permanently mark all Licensed Products made or sold under this license with the notice "Patent Pending" until a patent is issued by the United States Patent and Trademark Office. Upon issuance of a patent for the Licensed Product to Inventor, Company shall mark all Licensed Products with statutory patent notice in accordance with 35 U.S.C. section 297 of the United States Code.

7. In the event Company should fail to make any of the payments required when due or any report or statement as herein provided or to perform or fulfill any of its other obligations hereunder, then upon written notice of such failure from Inventor to Company, Company shall have twenty-two (22) days from the date of such notice with respect to breach of any obligation under either of paragraph 2 or 3 above, or forty-five (45) days from the date of such notice with respect to breach of any other paragraph, to correct the breach, and upon its failure to cure such breach, Inventor shall have the right, at its option:

a. to terminate this license agreement by giving Company written notice of termination; and/or
b. to proceed with such other remedies as may be available.

Upon giving of such notice of termination by Inventor, this License shall terminate. Company shall have the right to cure such default up to, but not after, the giving of such notice of termination by Inventor. Such termination shall be without prejudice to the right of Inventor for royalties due and payable hereunder at the time of termination and without waiver of any other liability of Company existing hereunder at the time of termination. If before the expiration of either of said fifteen (15) or thirty (30) day period respectively after notice of default, on which said notice of termination is based, said default is cured or remedied by Company, then this Agreement shall remain in force, provided that Company has otherwise performed its obligations under this Agreement.

8. In case of insolvency or bankruptcy of Company or if Company should make an assignment for the benefit of creditors or go out of business, this Agreement shall automatically terminate, but without prejudice to Inventor's right to royalties due and payable by Company at the time of termination.

9. Company acknowledges that the obligations created in this Agreement shall apply to its employees, agents, representatives, parent and subsidiary corporations.

10. All notices required or permitted to be given under this Agreement shall be in writing or telefaxed with confirmation by mail and shall be deemed to have been properly given and served on the date of telefax so long as confirmation is sent the same day by certified or registered U.S. Mail, or by overnight delivery service, postage prepaid, addressed to the party to whom notice is given to the attention of the following persons at the addresses noted, or such other addresses as may from time-to-time be appropriate notice in writing be designated by either party:

If to Inventor:

If to Company
Fax: ___________

11. The parties expressly agree and contract that it is their intention that this Agreement not violate any public policy, statutory or common laws; that if any sentence, paragraph, clause or combination of the same is in violation of any state or federal law, such sentences, paragraphs, clauses or combinations of the same shall be inoperative and the remainder of this Agreement binding only to the extent that it may be lawfully done under existing state and federal laws.

12. Termination or cancellation of the license for any reason shall not relieve either party of any obligation arising out of this entire Agreement accruing prior to such termination or cancellation and shall be without prejudice to rights and remedies arising from any breach or default.

13. Company may, at its option, take action to enforce any patent against any infringement of the Licensed Product, however Company shall have no obligation to take such action. In the event Inventor takes action to enforce any patent on the Licensed Product, Company shall provide full cooperation, at Inventor's expense, to support such action. The party that bears the full cost of an enforcement action shall be entitled to recover all proceeds recovered through such action.

14. Company agrees that it will manufacture and distribute the Licensed Product by ____(date)______. If Company fails to do so, all right and license to the Licensed Product shall is forfeited by Company.

15. Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding arbitration heard by a single arbitrator in _________(location)_____, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator may be entered into any court having jurisdiction thereof. Submission to and completion of such arbitration shall be a condition precedent to any litigation concerning such dispute.

16. The parties acknowledge and agree that time is of the essence in performance of this Agreement.

17. All general notices to third parties and all advertisement or publicity concerning the marketing of the Licensed Products shall be planned and coordinated by Company. Comoany agrees that in any advertising or publicity or application for prizes or awards, Inventor shall be named as the inventory of the Licensed Products.

18. This Agreement shall be deemed to have been made in (State) and the construction and performance thereof shall be governed by the laws of the (State).

19. No waiver by either party of any breach of any provision hereof shall be deemed a waiver of any other breach of the same or any other provisions hereof. No failure by either party to exercise any right or privilege herein provided shall be deemed a waiver of such party's right to exercise a similar or other right or privilege in conformity with the provisions hereof at any subsequent time or times.

20. This Agreement contains the entire and only agreement between the parties and it supersedes and merges all pre-existing agreements. Any representations, understandings, promises or conditions not expressly incorporated herein shall not be binding upon either party or their respective successors in interest.

21. This Agreement shall inure to the benefit of and be binding upon the successors of the parties hereto, including any corporation into which or with which any party hereto may transfer all of its property and assets relating to the subject matter covered by any patent for the Licensed Product, including its goodwill and business as a going concern, but this Agreement shall not be otherwise assignable, in whole or in part, by either party except pursuant to written consent of the other.

IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed by their respective duly authorized officers and the individual parties have signed these presents as of the day and year first above written.


____________ By:______________________________


____________ By:______________________________

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