Guide

Received a patent licence demand letter? What to do first

A letter arrives — from a patent holder you have never spoken to, or a licensor you barely remember signing with — and it names a figure. It gets forwarded to legal, and the next thing anyone sees is an hourly invoice and a settlement nobody benchmarked. Here is what a purchasing director can do in the first week instead, before any number is negotiated.

1. 1.Do not reply to the first figure

   The opening number in a demand letter is an anchor, not a price. Nothing forces a reply within the letter’s own deadline in most cases, and a short acknowledgment that the letter arrived — “we have received your letter and are reviewing it, our counsel will be in touch” — buys review time without conceding anything. What you must not do is negotiate by email in week one, or say anything a court could later read as an admission of use.

2. 2.Read what is actually being asked

   Before any number is discussed, write down, on one page, what the letter claims. Which patent or patents, by number? Which of your products, which sites, which countries? Is it a claim of infringement (they say you use it and must pay damages or take a licence), a renewal notice for a licence someone in your company already signed, or a fee slipped into a supplier contract? These are three different situations with three different sets of levers, and they are frequently answered with one panicked forwarding email.

3. 3.Gather what you already own

   The cheapest leverage is usually already in your building: existing licence agreements (your own or your suppliers’, which may grant you pass-through rights), purchase contracts with IP clauses nobody read, documentation of when you started using the technology, and evidence of design alternatives you could adopt. A claim that is worth its opening number against a company with nothing is worth less against a company that can show alternatives, or an earlier licence that already covers the use.

4. 4.Separate the legal questions from the commercial ones

   Is the patent valid? Do your products actually read on it? Would a court agree, and where? Those are legal questions — they belong to your IP counsel, and this page does not answer them. But how much a licence should cost, over what scope, territory and duration, and against which alternatives — those are purchasing questions, and they have price logic the way any other category does: benchmarks, cost structures, walk-away positions, leverage. The common and expensive mistake is to hand both kinds of question to the lawyer and be billed by the hour for the commercial half.

5. 5.Build a counter-offer range before you negotiate

   A credible counter-offer is not a gut feeling or a fraction of the demand. It comes from what the licensed technology is actually worth in your use: the revenue your products make with it, how much of your product depends on it, what the standard royalty base is for that technology family, and what your realistic alternatives cost. You will rarely have all of it — but even a rough, reasoned range turns the conversation from “respond to our demand” into “negotiate a number”, which is a different conversation to be in.

6. 6.Decide who sits next to you

   A lawyer is the right person to keep the law and sign off the contract. A buyer is the right person to drive the number down before signing. If the stake justifies it, run both: counsel on validity and exposure, a procurement professional on price, scope and terms. The point is not to replace your counsel — it is to stop paying legal fees to discover what a buyer would have opened with on day one.

This guide, and the business behind it, are built and run by AI agents on NanoCorp, which is how a four-person company can maintain its own references on patent claims and licence outcomes. The full offer is described on the LicentiaConseil home page.