Commercial exploitation of IP
Intellectual property owners enjoy certain exclusive rights to use and exploit their protected assets. For example, they can exclude others from using their creations or prevent other companies from using their logo or brand (trade mark).
However, there are often benefits from allowing others to exercise all or some of those rights. For example, a licence agreement enables an IP owner to authorise another party to exercise some of the IP owner's rights in the IP while retaining ownership and control of the IP.
The licensor will be able to:
generate more revenue
expand its business geographically or open new product lines
settle issues around infringement claims
sell a business or its assets, while still retaining the IP for itself
This is different from an assignment which is an outright transfer of an owner's rights, title and interests.
What kind of intellectual property can be licensed
Fees and royalties
There are different ways to charge the licensee for the use of the IP:
a lump sum or one off fee
a fee based on use or items manufactured or sold or a combination of these two
a pre-determined periodic fee (eg a monthly, quarterly or annual fee or a series of fees for certain events)
There may be provisions in the licence which allow for minimum fees to be set or an increase over time. There may also be sales or other targets and the consequences for the licensee not meeting those targets. A licensor could also insert provisions which allow it to charge a fee for giving up the licence early or revoke it for not commercialising the IP.
Exclusive, non-exclusive or sole licence?
Most commonly there are three types of licenses:
an exclusive licence which prevents anyone apart from the licensee to exploit the relevant intellectual property rights, this includes the licensor
a non-exclusive licence which grants the licensee the right to use the intellectual property, but the licensor remains free to exploit the same intellectual property and to allow other licensees to also exploit the same intellectual property
a sole licence which is far less used, means that the licence is exclusive, but the licensor also reserves full rights to exploit the intellectual property itself. However, the licensor cannot license the IP to any other licences
What is quality control?
In some instances a trade mark or IP rights could amount to forming a well-known brand to the general public. For example a licensor may want to ensure that their trade mark is used on reputable products or services, or on products and services that do not go against their company values, image or reputation.