How to License Your Patent and Earn Royalties in India

A patent doesn’t just protect your invention—it can also become a powerful revenue stream. If you’ve secured a patent in India, one of the most effective ways to monetize it is through licensing, where you allow another company or individual to use your invention in exchange for royalties.

For startups, inventors, and businesses, licensing offers a way to earn income without directly manufacturing or marketing the product yourself. Let’s explore how patent licensing works in India, the types of licenses available, and how you can maximize your earnings.

What Is Patent Licensing?

Patent licensing is a legal agreement where the patent owner (licensor) grants permission to another party (licensee) to use, manufacture, or sell the patented invention for a specific period, usually in exchange for royalty payments or a lump-sum fee.

In simple terms: you keep ownership of your patent, but you let others profit from it—and they pay you for the privilege.

Types of Patent Licenses in India

1. Exclusive License

   • Only one licensee can use the patent. Even the patent owner cannot exploit the invention.

   • Higher royalty potential, but limits your flexibility.

2. Non-Exclusive License

   • Multiple licensees can use the same patent simultaneously.

   • Common when the patent has broad applications.

3. Sole License

   • Only one licensee is granted rights, but the patent owner also retains the right to use the invention.

4. Compulsory License

   • In special cases (like public health), the government can allow third parties to use a patent without the owner’s consent, with royalty determined by law.

Steps to License Your Patent in India

1. Evaluate the Commercial Potential

Not all patents are licensing-ready. Assess the market demand, scalability, and profitability of your invention.

2. Decide the Licensing Model

• Lump-sum payment upfront.

• Royalty-based (percentage of sales).

• Hybrid model (smaller upfront fee + royalties).

3. Find Potential Licensees

Look for businesses already operating in your technology domain. Trade fairs, startup incubators, and industry associations are good places to connect.

4. Negotiate Terms

Key points to cover:

• Scope of license (territory, duration, exclusivity).

• Royalty rate (fixed or percentage-based).

• Performance obligations (minimum sales targets).

• Confidentiality clauses.

5. Draft a Licensing Agreement

Work with an IP attorney to ensure your agreement complies with Indian contract law and protects your rights.

6. Record the License with the Patent Office

As per the Indian Patents Act (Section 69), all license agreements must be recorded with the Controller General of Patents to be legally enforceable.

How Much Royalty Can You Earn?

Royalty rates vary widely depending on the industry and the strength of your patent. Typical structures include:

• 2–10% of net sales (common in pharmaceuticals, electronics, consumer goods).

• Higher royalties for breakthrough or hard-to-replicate technologies.

• Negotiated minimum guaranteed royalties to ensure steady income.

Benefits of Licensing Your Patent

• Steady Revenue Stream – Earn without building factories or distribution networks.

• Access to Markets – Partner with companies that already have reach and resources.

• Reduced Risk – Licensees bear manufacturing and commercialization risks.

• Scalability – Non-exclusive licensing lets you monetize the same patent across multiple industries or geographies.

Common Mistakes to Avoid

• Rushing into agreements without proper valuation of your patent.

• Offering overly broad rights that limit future opportunities.

• Not recording the license with the Indian Patent Office (which can invalidate enforceability).

• Ignoring international licensing opportunities if your patent is filed abroad.

Final Thoughts

Licensing a patent in India is not just a legal exercise—it’s a business strategy. Done right, it allows inventors and startups to earn royalties, expand market presence, and focus on innovation rather than manufacturing.

If you own a patent, think beyond protection—think monetization. Your patent could be more than an idea secured in law; it could be an income-generating asset.