Intellectual property licensing

Intellectual property (IP) licences allow individuals or businesses to use another's IP rights in exchange for a fee. Without an agreement in place, using someone else's IP could amount to an infringement of their rights. You can “license-out” your IP rights to another company or you can “license-in” if you want to use another company’s IP to develop your own business and products.

The person or company granting the licence is the licensor, and the person receiving the licence is the licensee.

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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.

Most types of intellectual property can be licenced including: 

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 (e.g. 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 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.

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, he or she cannot license the IP to any other licences.  

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 they 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.

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