What is a Patent License Agreement in Saudi Arabia?

What is a Patent License Agreement in Saudi Arabia?

A patent license agreement in Saudi Arabia is a contract under which the patent owner (the licensor) grants another party (the licensee) the right to use and exploit the patent for a specified period, in exchange for financial compensation or other agreed conditions.
In this article, Al-Salama Law Firm and Legal Consultations explains everything you need to know about patent license agreements in Saudi Arabia.

Types of Patent Licenses in Saudi Arabia

According to Article 1 of the Saudi Patent, Layout Designs of Integrated Circuits, Plant Varieties, and Industrial Designs Law, there are two types of licenses:

1. Compulsory License – an authorization for third parties to exploit a protected subject matter without the consent of the patent holder, in accordance with the provisions of the law.
2. Contractual License – a contract by which the patent holder authorizes another party to exploit some or all rights of the patent for a fixed period in return for agreed compensation.

Thus, patents may be licensed either through a compulsory license, without the owner’s consent, or via a contractual license, agreed upon with the owner in exchange for remuneration.

How to Obtain a Contractual License?

A contractual license can be obtained directly from the patent holder. For validity, the following conditions (Articles 21 and 22 of the Law) must be met:

• The license may cover all or part of the patent exploitation rights.
• The licensor must pay the applicable fees and record the agreement with the Saudi Authority for Intellectual Property (SAIP) for it to be enforceable against third parties.
• The license does not deprive the patent holder from exploiting the invention themselves or from granting another license, unless otherwise stipulated.
• SAIP may request amendments to the license to prevent abuse of rights, anti-competitive effects, or restriction of technology dissemination.

Compulsory Licensing of Patents

Rights of the Licensee

According to Article 23, the license entitles the licensee to exercise all the rights and privileges of the patent holder across Saudi Arabia for the protection period, unless otherwise limited in the agreement. The licensee cannot transfer the licensed rights unless explicitly permitted in the agreement.

Contractual (Voluntary) Licensing Agreement Clauses

Drafting a proper licensing agreement requires an IP and contracts specialist lawyer. For this reason, it is advisable to consult Al-Salama Law Firm to ensure that the license agreement protects both parties and is free from legal loopholes. Once drafted, the agreement must be registered with SAIP.

Compulsory Licensing of Patents

Article 24 of the Law allows SAIP to grant a compulsory license for patent exploitation without the patent holder’s consent, provided the following conditions are met:

• The request is made after 4 years from the filing date, or 3 years from the grant date (whichever is later), and the patent has not been sufficiently exploited without legitimate justification.
  
  
• The applicant must prove having made reasonable efforts to obtain a contractual license on fair commercial terms within a reasonable timeframe. Exceptions apply if the request comes from a government entity, in cases of public interest (e.g., health, security, food, economic development), or in emergencies.
• The license must primarily aim to supply the local market.
• The decision must define the scope, duration, and purpose of the license, subject to termination once the circumstances no longer exist.
  
  
• The license cannot be exclusive.
• Each application is decided on its merits.
• The patent holder must receive adequate remuneration, determined by the committee, and the licensee must comply with payment obligations.
  
  
• The licensee may not transfer the license unless it includes the enterprise benefiting from it, with SAIP’s approval.

Special Cases of Compulsory Licensing

Article 28 provides that a compulsory license may be revoked if:

• The licensee fails to adequately exploit the patent within 2 years (extendable if justified).
• The licensee fails to pay due amounts, including compensation to the patent holder, within 90 days.
• The licensee breaches any of the license conditions.

Questions and Answers

Don’t hesitate to contact us for assistance.

Read Also : What is the difference between protecting an idea and protecting an invention?