A patent license is an agreement between a patent owner (licensor) and a person or entity that wants to use or benefit from the patent (the licensee) in which the licensor grants the licensee the right to use the license in the manner and for the period of time (the term) described in the license agreement.

The licensor grants the licensee a license to use the patent in exchange for royalty payments (royalties) from the licensee—often based on a percentage of sales of the goods or services in which the licensee uses the patent.

There are different types of licenses, including exclusive licenses, nonexclusive licenses, and partially exclusive licenses. A license may also grant the licensee the right to sublicense the patent rights to other persons or entities—often when the original license is an exclusive license.

In South Dakota, as in all states, patent licensing is governed primarily by federal law, as patents are a matter of federal jurisdiction under the United States Patent and Trademark Office (USPTO). A patent license in South Dakota allows the licensee to use the patent as specified in the agreement, which is a contract subject to state contract laws. The agreement typically details the scope of the license, the term, and the financial arrangement, such as royalties. Exclusive licenses grant the licensee the sole right to use the patent, while nonexclusive licenses allow the patent owner to license the patent to multiple entities. Partially exclusive licenses may restrict some rights exclusively to the licensee while allowing the licensor to retain other rights. Additionally, some licenses may include the right to sublicense, enabling the licensee to grant patent rights to third parties. It's important for both licensors and licensees to ensure that their agreements comply with relevant laws and that they fully understand the terms and implications of the license. An attorney with expertise in intellectual property law can provide crucial guidance in drafting and negotiating patent licenses to ensure they are legally sound and protect the interests of both parties.