Cross Licensing: How to Build a Bigger Pie and Avoid Legal Disputes

Cross-licensing is an agreement between two or more intellectual property owners where each one grants the other rights to their intellectual property. Usually the IP that each party owns covers different aspects of a product or technology. Cross licensing is a strategy that’s used to settle patent disputes and for developing new relationships and partnerships.

For example, two companies both have patents that if commercialized will infringe upon the other. They agree to exchange these rights, allowing each company the freedom to commercialize products covered by the others patents without provoking a patent infringement lawsuit. Certain industries, such as high-tech, use cross-licensing often because they have such large IP portfolios that they cannot practically avoid infringing on each others patents.

For partnerships, cross-licensing is a good option when two competing firms with different research and development strengths can take advantage of the others progress. This creates the same sort of work together as a joint venture without the inconvenience and delay of setting up joint operations.

Cross licensing is also used to create new innovations and markets from two different intellectual properties. Company A has a patented new drug compound for blood pressure. Joe the Inventor notices that hair grows back on his bald head when he takes the blood pressure pill combined with a glass of orange juice. He gets a patent on a method for hair regrowth. Neither the Company nor Joe can make any money without cross-licensing from each other. Joe can’t sell the pill because Company A owns the patent on it, but Company A can’t sell the pill as hair regrowth treatment because Joe owns the patent on that. In this case, Company A would likely pay Joe for a license to his method, and then both sides would make money on the IP.

Other non-patent intellectual property such as copyright and trademark can also be cross-licensed. For example, a literary work and an anthology that includes that literary work can cross-licensed between two publishers. A cross-license for computer software can include patent, copyright, and trademark.

Cross-licensing is a relatively low-risk for two IP owner to exchange intellectual property so each can make money without infringing upon the other. It’s also a good strategy to consider when seeking a development partnership or to share new market opportunities.

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