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Semiconductor Licensing


As we discussed in the last column, patents for semiconductor technology were pursued in the past in order to protect against the potential misappropriation of an invention. The rationales for a company to now seek patent protection in the semiconductor sector have expanded to include: 1) ensuring that a company not be excluded from a particular field of use; 2) obtaining more favourable terms in their licensing negotiations; 3) protecting themselves from potentially costly patent litigation; 4) receiving access to external technologies with better financial terms; and 5) generating revenue through licensing.
 With respect to generating revenue through licensing, a company will first need to have in its possession a patent portfolio that others deem necessary to license. Therefore, in order to have a stronger patent portfolio, companies should diligently seek to file patent applications that cover new and emerging technologies they are developing, and to continue to patent improvements on the technology.  A benefit of having a more comprehensive portfolio is that the likelihood that the company’s patents are infringed increases, and therefore the potential to license the technology increases as well.
 However, simply having multiple patents will not necessarily translate to great licensing revenues, as the valuation of a patent, and the benefits to be derived from any licensing agreements are based on a variety of factors. A patent portfolio is valued based on a combination of both qualitative and quantitative criteria. According to Semiconductor Insights, a company specializing in patent analysis of integrated circuits, some factors to consider when studying a portfolio to determine whether it may be successfully licensed include: 1) The size of the market to which the technology relates – the likelihood that the patent may be successfully licensed increases if the patent is applicable to a large and/or emerging market space; 2) Use of patented technology in the industry – if the patent relates to activities that are easier to uncover, it is easier to license the patent or patents in the portfolio;  3) Evidence of actual infringement – by having actual evidence of infringement, discussions between the two parties are more likely to favour the patent owner;
4) Sphere of application – a patent may generally be more valuable if it has relevance to different technological sectors;  5) Date of patent – if the patent relates to a market sector that is very competitive, a patent with an early date of issuance is likely broader in nature in terms of the scope of protection if offers the patentee.
 There are however risks associated with embarking on a patent licensing strategy. One major risk companies are wary of is found when a company that is alleging patent infringement against another may itself open the door to having the targeted company allege patent infringement against it.  Therefore, it is important that due diligence be conducted not only with respect to your own patents, but with respect to the patent holdings of any competitors who may be infringing your patents, as this will allow for an informed decision to be made as to the risks associated with alleging patent infringement.
Ebad Rahman is a Toronto based lawyer with the Intellectual Property law firm of Bereskin & Parr. He can be reached by phone at (416) 364-7311 or by e-mail at mailto:erahman@bereskinparr.com.. This article is intended to provide general information regarding intellectual property and should not be considered legal advice.