Patent Licensing: How Inventors Can Earn From Their Patents

A Nepal patent licence lets an owner approve another party's use of a registered invention without selling the patent. The commercial contract matters, but it is not the whole process: Sec. 21D of the Patent, Design and Trade Mark Act 1965 requires written approval and a joint application at the Department of Industry.

Key takeaways

• A licence grants defined permission; an assignment transfers ownership.
• Sec. 21D applies to a registered patent and requires both parties to apply jointly to the Department.
• The agreement should define technology, uses, territory, exclusivity, reporting and termination.
• No statute supplies a standard royalty rate; the parties must write the calculation clearly.
• The licence cannot outlive patent rights that expire or are cancelled.
• A Nepal patent begins with a seven-year term and can be renewed twice under Sec. 23B.
• Confidential know-how, improvements and trademarks need their own clauses or agreements.

What is patent licensing in Nepal?

Patent licensing is permission to use a registered invention on agreed conditions while ownership stays with the proprietor. The permission may cover making, using or selling a product, applying a process, or operating within a specified technical field.

Nepal's Act does not use a detailed licensing vocabulary. Instead, Sec. 21D(1) allows the owner of a registered patent to provide written approval for another person to use it. That statutory route should anchor the commercial document.

What does Sec. 21D require?

Sec. 21D(2) requires the proprietor and the person receiving approval to submit a joint application to the Department with the prescribed fee and particulars. Under Sec. 21D(3), the Department may grant the approval after receiving that application.

Sec. 21D(5) then requires the Department to record the approval and issue a note to the approved user. A signed private agreement should therefore allocate responsibility for the joint filing and make completion of the Departmental step a deal condition.

Can an unregistered invention be licensed?

Parties can contract around know-how, development work or a future application, but that is not a licence of a registered Nepal patent. Sec. 21D is written around a right already registered at the Department.

Before grant, use confidentiality, ownership and future-licence provisions that say what happens if the application changes, is refused or never becomes a patent. Do not describe a pending application or an idea as a registered patent. The patent application guide explains the national filing sequence.

Who should sign the licence?

First compare the proposed licensor with the name on the registration certificate and Department record. If ownership moved, confirm that the transfer was recorded. For joint owners or a company, establish who has authority to approve use and sign the application.

The licensee's legal name must also be exact. A trading name, group name or distributor label may not identify the party carrying the obligations. Keep resolutions, authority documents and any power of attorney with the transaction file.

What should the licensed scope describe?

Start with the patent number, registration date, title, specification and relevant claims. Then state the permitted acts, products, process steps, territory, customers and field of use. Avoid promising “the technology” without connecting that phrase to the registered right.

A Nepal patent has territorial effect in Nepal. A foreign patent or PCT publication does not create the same right here, and Nepal is outside the PCT. If the deal covers several countries, list each national right separately. See international patent filing from Nepal for the territorial distinction.

Which licence model fits the deal?

These labels are commercial drafting terms, not separate patent categories in the Act. Define the actual permissions instead of relying on the heading alone. Sub-licensing, outsourcing and affiliate use should be express.

How can an inventor be paid?

The parties may use an upfront payment, recurring fixed payments, a sales-based royalty, milestone payments or a combination. The Act does not publish a standard commercial royalty rate, so the agreement must supply the formula.

For sales-based payments, define net sales, currency, returns, discounts, bundled products, related-party sales, reporting dates and audit access. For milestones, identify the objective event. Minimum performance duties can protect an inventor from an exclusive licensee that shelves the technology.

What records should support royalties?

Require periodic statements showing units made, units sold, invoiced value, allowed deductions and the resulting royalty. State how long the licensee keeps records and who may inspect them. A payment figure without a reproducible calculation is hard to verify.

Also decide how tax withholding, exchange conversion and disputed statements are handled. Those are accounting and tax questions as well as patent questions, so obtain current professional advice for the parties' actual structure.

How long can the licence continue?

Sec. 8 gives a registered Nepal patent an initial seven-year term from registration. Sec. 23B allows two further seven-year renewals, so 21 years is the statutory ceiling if the renewal requirements are met.

The ordinary renewal application is due within 35 days after expiry, followed by a six-month late window under Sec. 23B(2). The agreement should say who files, who supplies evidence and what happens if the patent lapses, is cancelled or reaches the end of its final renewal term. The patent renewal guide explains those deadlines.

How should improvements be handled?

Later improvements may fall outside the original claims. State who owns employee and contractor developments, who decides whether to file another application, and whether the licensee receives access to future rights.

Separate patent rights from confidential know-how. Testing methods, tolerances, supplier information and production settings may need confidentiality controls even when the patent specification is public. A patent-versus-utility-model guide also explains that Nepal's Act creates no utility-model route.

What due diligence should a licensee do?

Read the registration certificate with the specification and claims behind it. Check the owner, registration date, remaining renewal term, any recorded transfer, and whether the promised product is actually within the registered subject matter. The patent-certificate guide provides a document-by-document checklist.

Searches provide context but do not replace the Department record. Nepal has no complete public per-record patent database, and the Industrial Property Bulletins available to IP Sewa contain trademark entries. A licensee should record what was checked, what was obtained from the proprietor and what still needs official confirmation.

For a foreign-priority story, compare the dates and countries carefully. Nepal is a Paris Convention member, while it remains outside the PCT. WIPO's Paris Convention page explains the treaty framework, but only the Nepal filing and registration can support a Nepal patent licence.

First-to-file planning also makes dates important, but an early filing does not prove that every licensed feature is protected. Review the final registered claims, not the inventor's original pitch or an overseas family member. The patent-search guide explains the limits of the available evidence.

What should happen on termination?

State whether termination follows non-payment, misuse, insolvency, loss of the patent, missed performance or an uncured breach. Give a clear notice and cure process, then address unsold stock, confidential material, tooling, customer commitments and final reports.

Termination of the contract and expiry of the patent are different events. Contract duties such as confidentiality, audit access and payment of accrued royalties may survive, but the agreement should not pretend that patent exclusivity continues after the registered right ends. See how Nepal patent protection works for that boundary.

Who handles infringement?

The agreement should allocate monitoring, evidence collection, correspondence, proceedings, settlement control and recoveries. An exclusive commercial position does not by itself answer who may act or who pays.

Sec. 3(2) prohibits unauthorised use of another person's registered patent, subject to transfer or written permission under Sec. 21D. The patent infringement guide covers the Departmental remedies and evidence questions.

How do the parties complete the deal?

1. Verify the right. Check the certificate, proprietor, term, claims and renewal record.
2. Define the commercial scope. Set permissions, territory, field, exclusivity and sub-licensing.
3. Write the payment method. Make every input and reporting date testable.
4. Protect supporting assets. Address know-how, improvements, quality and any brand use.
5. Sign with authority. Confirm the legal identities and authorised signatories.
6. Apply jointly. Submit the Sec. 21D application and current required documents to the Department.
7. Keep evidence. Retain the agreement, Department note, reports, audits and renewal documents.

Confirm the current filing form and document practice with the Department of Industry. Read the governing provisions through the Nepal Law Commission and use IP Sewa's patent registration service when the deal also requires a national filing review.

Common mistakes

• Licensing an idea as a patent. Verify registration first.
• Stopping at the contract. Complete the joint Sec. 21D filing.
• Using vague scope. Tie permission to claims, products and fields.
• Ignoring expiry. A licence cannot preserve an expired monopoly.
• Leaving royalties unauditable. Define records and deductions.
• Bundling every right together. Patent, know-how, design and trademark rights differ.

What would a Nepal example look like?

This is an illustration, not a real case. An inventor owns a registered grain-drying patent and negotiates with one manufacturer. The deal permits production in Nepal for agricultural customers, requires periodic sales statements and reserves experimental improvements to the inventor.

The parties verify the claims and renewal date, sign the agreement, submit their joint application under Sec. 21D and keep the Department's note with the contract. If they later add a brand licence or a new patent, they document that right separately.

In short

A sound Nepal patent licence combines a precise commercial contract with the statutory recordal route. Verify the registered right, define the permission and royalty evidence, apply jointly under Sec. 21D, and track renewals for the life of the deal.

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Planning a licence around a registered Nepal patent? Contact IP Sewa with the certificate, claims, renewal record and proposed commercial scope.