Legal Definitions - shelving

Shelving refers to the situation where a company or individual who has been granted a license to use a patented invention (or sometimes a trademarked product) fails to begin or discontinues its commercial use during the agreed-upon period, typically the term of the license agreement.

Essentially, it means the licensed technology or product is put "on the shelf" and not actively developed, manufactured, or sold. Licensors often include specific clauses, known as "anti-shelving provisions," in their agreements to prevent this, ensuring that the licensed innovation is brought to market and generates revenue for both parties.

Here are some examples illustrating shelving:

• Imagine a pharmaceutical company, PharmaCo, licenses a patent for a promising new drug compound from an independent inventor. The license agreement specifies that PharmaCo must begin clinical trials and development within two years. However, PharmaCo decides to prioritize other projects and never initiates the trials or any commercialization efforts for the licensed compound, letting the patent sit unused for the entire two-year period. This inaction by PharmaCo constitutes shelving because they failed to commercially utilize the licensed patent as agreed.

• Consider a software development firm, InnovateTech, that licenses a patent for a groundbreaking data compression algorithm from a university research lab. The license requires InnovateTech to integrate the algorithm into at least one commercial software product within three years. Despite having the rights, InnovateTech's management shifts focus to a different product line, and the patented algorithm is never incorporated into any of their offerings, nor is it marketed independently. This scenario is an example of shelving, as the licensed technology was not put into commercial use.

• A clothing manufacturer, StyleCorp, obtains a license for a patented fabric design that promises enhanced durability and comfort. The license agreement stipulates that StyleCorp must produce and sell garments using this fabric within 18 months. After receiving the license, StyleCorp encounters unexpected production challenges with the new material and decides it's easier to stick with their existing fabric suppliers. They never launch a product line featuring the patented design, effectively letting the license expire without commercial use. This demonstrates shelving, as the patented design was not utilized for its intended commercial purpose.