Introduction:
Patents are instruments of exclusion. That has been their defining commercial identity since modern patent systems came into play. A patent gives its owner the right to stop others from “making, using, and selling” the patented invention without his/her authorization. It follows naturally that the enforcement of patents and the assertion of these exclusionary rights in court became the dominant point for discussions of patent value. If one has a strong patent, they may either prevent competitors from unauthorized use of the said patent or they may sue them before courts.
That framing, while accurate as far as it goes, tells only one part of the story. And increasingly, it has become the less commercially important part. Over the past several years, and with particular clarity in 2026, patents have begun to function differently in commercial strategy. They are no longer discussed primarily as weapons. They are being discussed as assets – assets that can be licensed, valued, pledged as collateral, and packaged into structured revenue streams. Patents have gone from being instruments of exclusion to more than just that, i.e., a cultivable asset in the commercial sphere.
This shift is not accidental, and it is not simply a function of legal creativity. It indicates a change in how businesses, investors, and financial institutions are thinking about intellectual property in the commercial sphere. When intangible assets now constitute the majority of enterprise value in technology-driven sectors, IP, specifically, patents can no longer be treated as dormant legal rights that are relevant when the rights pertaining to it are violated. Instead they are viewed as important business assets, providing a competitive advantage to the businesses that have a better patent portfolio management than the others.
The central question this article examines is why licensing has displaced litigation as the preferred route for extracting commercial value from patents, particularly in 2026. The analysis draws on global and Indian developments in patent commercialisation, the mechanics of different licensing models, and the structural limitations of litigation-first strategies. The argument, put simply, is that recurring licensing revenue is more commercially attractive than uncertain damages out of litigation and this tells us something important about where intellectual property practice is heading.
Patents as Monetizable Commercial Assets:
The shift toward licensing-based monetization starts with a recognition that should have been obvious much earlier- patents are commercial assets before they are legal instruments. A patent that no one wants to use is of limited value, regardless of how well-drafted its claims are. A patent that covers a technology that others must implement for their products, for compliance with a standard, or for entry into a market has inherent commercial advantage that extends well beyond the courtroom.
In India, this recognition has been slow but is now gathering pace. Section 70 of the Patents Act, 1970, contains provisions for voluntary licensing. Further sections 84 to 94 deal with compulsory licensing. A primal, defining judgement with regards to compulsory licensing is Natco Pharma Ltd. v. Bayer Corporation (2012), where the Intellectual Property Appellate Board granted India’s first compulsory licence on the ground that the patented drug was not being worked commercially (making, using, selling etc.) in India and was not reasonably affordable to the public. The Natco v. Bayer judgment made it abundantly clear that patent rights are not merely meant to be held as a matter of right but it is crucial that it must be deployed commercially. This is especially important in areas like pharmaceutical industries.
Section – 83 of the Patents Act sets out the general principles applicable to working of patented inventions. These include the principle that patents are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article, and that patent rights shall not impede protection of public health or nutrition. Reading these provisions together with the compulsory licensing regime, one arrives at a legislative philosophy that is fundamentally uncomfortable with patents held purely for exclusion. The law, at least in its Indian formulation, actively encourages commercial working which in practice, means either manufacturing or licensing.
At the level of commercial practice, this legislative nudge aligns with a broader global recognition that patents must be managed, not merely held. For a corporation with a large portfolio, the realistic choices are to manufacture across every product category covered by its patents (often impossible), to selectively enforce against infringers (expensive and uncertain), or to build a licensing programme that generates income from the portfolio on a systematic basis. The third option, in most circumstances, makes the most financial sense.
Why Litigation Is Losing Its Commercial Appeal:
Patent litigation is expensive in every jurisdiction. In India, patent suits are filed before District Courts and, since the amendments of 2002 and 2003, also before the High Courts that have jurisdiction over commercial disputes. The Commercial Courts Act, 2015, has introduced a slightly more structured regime for commercial disputes including IP matters, but the fundamental challenges of cost, delay, and forensic complexity remain. An infringement suit involving technical experts, claim construction disputes, and parallel validity challenges can easily consume years and significant resources before any outcome is reached.
Beyond cost and delay, there is a more fundamental problem. Litigation produces binary outcomes. The patentee wins or loses. The claim is valid or it is not. There are no intermediate positions, no negotiated arrangements, and no commercial relationships to speak of after a contested judgment. For parties who operate in the same technology space and may be customers, suppliers, or future collaborators for each other, that adversarial finality can cause lasting commercial damage that no damages award makes up for.
The jurisdictional complexity of patent enforcement compounds these difficulties. A company with products sold across multiple territories must evaluate whether to file infringement proceedings in India, the United States, Germany, the United Kingdom, or elsewhere each with different procedural timelines, damages frameworks, and standards for claim interpretation. Anti-suit injunctions have become a common feature of complex SEP disputes globally, with courts in China, Germany, the United States, and the United Kingdom competing for jurisdiction over global FRAND licensing terms. That kind of multi-forum chaos increases cost, uncertainty, and management distraction simultaneously.
In 2025, the Ericsson – Lenovo dispute illustrated this precisely. The parties litigated across multiple jurisdictions before eventually settling and agreeing to resolve their outstanding FRAND licensing disputes through arbitration. The Nokia-Amazon video streaming dispute followed a similar arc. Both cases reinforced a pattern that practitioners had already observed- the longer and more expensive the litigation, the more clearly it demonstrated the superior commercial logic of a negotiated licence.
For Indian companies, there is an additional reputational dimension. Brand-sensitive technology companies, pharmaceutical firms, and start-ups increasingly find that aggressive patent enforcement campaigns attract regulatory attention and negative public perception. The story of excessive patent enforcement, particularly in pharmaceutical contexts where access to medicines is at stake has entered public discourse in India in a way that constrains enforcement strategy. Licensing, which frames the relationship with an implementer as commercial rather than adversarial, is simply easier to defend publicly and commercially.
The Rise of Patent Licensing as a Commercial Strategy:
Against this backdrop, licensing has evolved from being an occasional settlement mechanism to a structured and primary monetization route. The different licensing models available under the Patents Act and general contract law accommodate a wide range of commercial objectives.
Exclusive and Non-Exclusive Licenses
An exclusive license can be defined as a license which grants the licensee the sole rights to work the patent, according to section 2(f) of the Patents Act, 1970. The specifics of each license are of course, subject to the given terms and conditions of the said Licensing Agreement. This licensing allows the patent owner to effectively commercialize the patent through other entities. For technology companies, pharmaceutical companies etc., exclusive licensing can replicate the commercial effect of a strategic partnership. Non-exclusive licensing, by contrast, is designed for greater coverage. Multiple licensees pay royalties on standardised or flexible terms, as the case may be and the licensor benefits from building a web of commercial exploitation of the patent rather than relying on a single partner as in exclusive licensing.
Cross-Licensing and Patent Pools
Cross-licensing arrangements are particularly important in technology sectors such as telecommunications, semiconductors, and electronics manufacturing. In these industries, no single firm owns all the patents necessary to manufacture a compliant product. Cross-licences uses this feature of the patents network to create agreements, often with balancing payments where one party’s portfolio is assessed as stronger. WIPO’s contribution to patent pools and standard-essential patent licensing reflects how essential these arrangements have become for enabling product markets to function at all.
FRAND-Based Licensing and Standard Essential Patents
Standard Essential Patents (SEPs) present the most interesting context for licensing. A patent that is essential to the implementation of a technical standard, whether in wireless communications, video codecs, or other fields must, by the terms of most standard-setting organisations, be licensed on fair, reasonable, and non-discriminatory (FRAND) terms. The rationale is clear- if implementers were freely enjoined from using standards-essential technology, standardisation itself would be undermined.
India’s Supreme Court, in Competition Commission of India v. Ericsson (disposed of in 2026), addressed the tension between patent law and competition law in the SEP context. The Court’s disposal of the matter has triggered significant debate about whether the CCI has concurrent jurisdiction to examine FRAND commitments as a matter of competition law, or whether the correct forum is the Controller of Patents or civil courts under the Patents Act. That jurisdictional question matters commercially because it determines how Indian implementers can push back against what they perceive as excessive royalty demands. The debate also reflects a deeper unresolved issue: how should Indian law value a standard-essential patent in the absence of robust comparable licence data?
WIPO’s 2026 report on SEP valuation methods addresses precisely this gap, providing economic frameworks like top-down approaches, comparable licence analyses, and incremental value assessments to help parties and adjudicators arrive at FRAND-compliant royalty ranges. For Indian practitioners advising technology companies, this report is significant. It signals that the international community is trying to bring greater methodological rigour to FRAND valuation, and that Indian courts and regulators will eventually have to engage with the same frameworks.
From Courtroom Recoveries to Recurring Revenue:
The financial logic of licensing over litigation is straightforward once one accepts that patents are commercial assets rather than legal trophies. A damages award, even if substantial, is a one-time event. It arrives at the end of proceedings that may have taken years. It may be reduced or reversed on appeal. It settles a historical dispute but does nothing to create ongoing commercial value. A licensing arrangement, by contrast, produces contractually defined cash flows: running royalties, minimum guarantees, milestone payments, and in some cases securitisable income streams.
This is where the connection to IP-backed financing becomes significant. WIPO’s IP Finance Pilot Project, launched in partnership with MIDF in Malaysia in 2025, is designed to test how IP portfolios can be assessed as collateral in actual lending scenarios. The emphasis is on evaluating ownership, validity, market position, and revenue potential, the same criteria a commercially sophisticated licensor would apply when designing a licensing programme. Once patents are treated as assets which can be collateral, the pressure to generate licensing income from them becomes real. A portfolio with signed licences, audited royalty reports, and minimum payment commitments is simply more financeable than a portfolio whose value depends entirely on speculative enforcement outcomes.
In India, the IP-backed lending market is at an early stage, but the regulatory and institutional groundwork is being laid. The Insolvency and Bankruptcy Code (IBC) framework has begun to engage with the treatment of IP assets in resolution proceedings, though consistent valuation standards are still absent. The Department for Promotion of Industry and Internal Trade (DPIIT) has sought to encourage IP commercialisation as part of the broader National Intellectual Property Rights Policy. If India is to make meaningful progress on monetizing domestic innovation, developing institutions and frameworks that support licensing-based revenue will matter far more than adding more enforcement mechanisms.
A portfolio-wide licensing programme, as opposed to ad-hoc licensing in response to infringement, is also a more reliable business model. It allows rights holders to approach implementers systematically, use analytics to prioritise the most commercially relevant patent families, and standardise licensing terms across a sector. Revenue becomes predictable. Valuation becomes grounded in contract data rather than projection. The commercial case for ongoing IP investment becomes easier to make to management and investors.
Industry Trends in 2026:
In telecommunications and SEP-intensive technologies, ETRI in South Korea reported record licensing revenues exceeding 50 billion Korean won for 2025, driven by its standard-essential patent portfolio in advanced telecommunications. That figure is not merely interesting as a data point. It demonstrates that a research institution, not a manufacturing company, can generate substantial recurring income from patents through a disciplined licensing programme. That model has direct relevance for Indian academic institutions and public research laboratories such as the CSIR labs and the IITs, which produce significant patent filings but have historically struggled to convert those filings into revenue.
In artificial intelligence and software-heavy technologies, patent licensing has become attractive partly by necessity. The eligibility of AI-related inventions under patent law remains contested in multiple jurisdictions. Indian patent law, through the exclusion in Section 3(k) of the Patents Act on mathematical methods, business methods, computer programmes per se, and algorithms, creates uncertainty around how claims directed at machine learning architectures will be treated. In that environment, licensing a technology package- combining patents, software, know-how, training, and data as a bundled technology transfer agreement is often more commercially robust than relying on a litigated patent claim whose scope may be challenged on eligibility grounds.
In pharmaceuticals, voluntary licensing has taken on renewed significance in the post-pandemic context. The global discussion around TRIPS flexibilities, access to patented medicines, and the Doha Declaration has made pharmaceutical companies more attentive to the reputational and regulatory risks of refusing to license. In India, where Section 84 of the Patents Act provides a standing mechanism for compulsory licensing applications after three years from grant, the threat of a compulsory licence functions as commercial pressure that incentivises voluntary licensing before the statutory route is invoked. The Natco precedent still casts a long shadow over pharmaceutical patent strategy in India.
Green technologies represent a newer frontier. Climate-relevant inventions in battery chemistry, solar materials, carbon capture, and hydrogen systems are increasingly being shared through licensing as governments and multilateral institutions push for rapid deployment. Public-private licensing arrangements and green patent pools are emerging as mechanisms for balancing innovation incentives with access objectives. For Indian firms in renewable energy and clean manufacturing, building a licensing strategy around green technology patents could be as commercially important as the manufacturing capability itself.
Challenges and Risks in a Licensing-Led Model:
The preference for licensing does not eliminate complexity. It shifts the battleground.
Royalty setting remains one of the most contested aspects of any licensing negotiation. Determining the appropriate royalty base, selecting comparable licences, and apportioning value among multiple technologies in a complex product are all intensely factual and contested exercises. In India, where there is little published guidance on royalty rates and no equivalent of the United States’ established body of case law on patent damages apportionment, licensors and licensees are largely left to negotiate without reliable reference points. WIPO’s methodological framework for FRAND valuation is a step toward addressing this gap at the global level, but Indian-specific benchmarks are still needed.
Antitrust and competition concerns also accompany licensing programmes. The Competition Act, 2002, prohibits agreements that appreciably restrict competition, and Section 4 addresses abuse of dominance. The CCI has shown willingness to examine whether FRAND licensing terms offered by SEP holders constitute abuse of their dominant position. The Ericsson proceedings being the clearest example of this in India. Cross-licensing arrangements and patent pools can raise similar questions if structured in ways that foreclose market entry or disadvantage downstream competitors.
Default by licensees is a recurring practical problem. A licence removes infringement risk but creates contract risk. Licensees may under-report sales, delay royalty payments, or challenge the validity of licensed patents once the licence is in place. Drafting robust audit rights, termination mechanisms, and dispute resolution clauses, ideally with arbitration given the confidential nature of licensing terms, is therefore critical to making a licensing programme commercially viable. In cross-border arrangements, enforcement of arbitral awards and the treatment of licence-related disputes under foreign governing law add further complexity.
Smaller patentees face a structural disadvantage. Large implementers have historically been able to delay or ignore licensing invitations from smaller rights holders, reasoning that the cost of enforcement is prohibitive. The growth of litigation finance, while it has helped in some contexts, is not universally accessible. If a licensing-dominant system is to work for all rights holders including Indian start-ups, universities, and individual inventors it must be accompanied by credible and cost-accessible enforcement mechanisms. Licensing and enforcement are not alternatives. They are complements.
The Changing Role of IP Counsel:
The shift from litigation-first to licensing-first thinking has a direct and concrete implication for how IP lawyers are expected to practise. The question asked of counsel is no longer only whether a patent is valid and infringed. It now frequently extends to whether a patent portfolio can support a licensing programme, how royalties should be structured to survive antitrust scrutiny, what valuation methodology would be appropriate for a specific technology domain, and how a licensing arrangement should be drafted to maximise enforceability and minimise counterparty risk.
For Indian law firms with IP practices, this creates both a challenge and an opportunity. The challenge is skill development since patent licensing requires fluency in commercial contract law, valuation theory, international arbitration, and sector-specific market dynamics in addition to the doctrinal IP knowledge that has traditionally defined the practice. The opportunity is that clients, particularly in technology, pharmaceutical, and clean energy sectors are now willing to pay for integrated IP strategy advice rather than just prosecution and litigation services. The most commercially valuable IP advice in 2026 is probably not about the next infringement suit. It is about whether the next years of licensing revenue can support the company’s financing strategy.
Conclusion:
The movement from litigation-driven enforcement to licensing-led monetization represents a structural change in the economics of intellectual property ownership, not a cyclical adjustment. As patents are increasingly held and managed as financial assets capable of generating royalties, supporting valuations, and backing financing transactions, the commercial rationale for litigation-first thinking diminishes. That does not mean litigation disappears. It means litigation becomes, in most commercial strategies, a backstop and a source of negotiating leverage rather than the end goal.
For India, the implications are significant and somewhat underappreciated. The Patents Act already contains legislative architecture in its working requirements, compulsory licensing provisions, and general principles on IP commercialisation that reflects a preference for active, market-based deployment of patent rights over purely exclusionary enforcement. That legislative philosophy aligns with the direction in which sophisticated patent strategy is moving globally. The task for Indian firms, courts, and policymakers is to build the institutions, valuation standards, and commercial culture that allow that philosophy to translate into practice.
Ultimately, the most important shift in patent practice may not be procedural. It is conceptual. A patent that produces annual royalties, supports an IP-backed credit facility, and anchors a cross-licensing network is doing something that a litigated judgment rarely achieves: it is generating durable, compounding commercial value. That is what it means to move from litigation to liquidity.
Author : Shriyansh Tiwari, In case of any queries please contact/write back to us via email to [email protected] or at IIPRD.
Endnotes
- The Patents Act, 1970 (Act No. 39 of 1970), particularly Sections 70, 83 and 84–94, Government of India, available
- Natco Pharma Ltd. v. Bayer Corporation, Order of the Controller of Patents, Compulsory Licence Application No. 1 of 2011 (9 March 2012); affirmed by the Intellectual Property Appellate Board, OA/35/2012/PT/MUM.
- World Intellectual Property Organization (WIPO), Licensing of Intellectual Property: A Practical Guide, available at: https://www.wipo.int/publications/en/details.jsp?id=4080 (last visited 25 June 2026).
- World Intellectual Property Organization (WIPO), World Intellectual Property Report 2024: Making Innovation Policy Work for Development, available at: https://www.wipo.int/publications/en/details.jsp?id=4693(last visited 25 June 2026).
- World Intellectual Property Organization (WIPO), WIPO Patent Pools and Standards Database, available at: https://www.wipo.int/patent-landscapes/en/standards/ (last visited 25 June 2026).
- World Intellectual Property Organization (WIPO), IP Finance Dialogue and Intellectual Property Financing Initiatives, available at: https://www.wipo.int/ip-finance/en/ (last visited 25 June 2026).
- Competition Commission of India v. Telefonaktiebolaget LM Ericsson (Publ), Civil Appeal arising from the Delhi High Court proceedings concerning Standard Essential Patents (SEP) and FRAND licensing, Supreme Court of India (disposed of in 2026).
- United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2025: International Investment in the Digital Economy, United Nations, Geneva (2025), available at: https://unctad.org/publication/world-investment-report-2025 (last visited 25 June 2026).