Lesson 1: IP Licensing

An IP licensing agreement is a contractual arrangement between the owner of IP (the licensor) and a third party (the licensee), where the licensor grants the licensee permission to do certain defined things with the licensor’s IP.

Business factors that might influence whether to license your IP rights instead of retaining entire control yourself include:

  • wanting to enter into the market of a foreign country, where it may be easier to license a local licensee;
  • not having sufficient manufacturing capacity;
  • not having the expertise required to exploit your IP rights effectively;
  • wanting to generate a source of revenue;
  • wanting to enhance the perceived value of your IP as an asset for the purpose of an acquisition or financing; and
  • using a cross-license as a means to reduce your liability to someone who is or could assert their IP against you.
Patents, trademarks, copyrights, industrial designs and confidential information/trade secrets can all be licensed.

There are certain basic principles you should consider when entering into a license agreement. These include the following, which are intended as suggestions only.

As always, it is advisable to seek expert help in drafting or reviewing a license agreement.

The licence should be in writing.
You should clearly specify what IP is being licensed.
You should specify what the licensee is permitted to do. For example, in the context of copyright, you might want to specify that the right consists of a right to copy the work but not to translate it.
You should specify the geographical area in which the licensee can exploit the licensed rights.
Restrict the particular industry or the product in relation to which the licensee can exploit the licensed right.
You should stipulate whether the licensee has exclusive rights (such that no one else can exploit the licensed rights, including the licensor); sole licence (where the licensee is the only licensee, but the owner can exploit the same rights as well); or non-exclusive licence (where the licensee can grant anyone a licence over any part or the whole of what has been licensed to a licensee).
Specify the duration of the licence and any renewals.
Stipulate what circumstances will allow a party to terminate the license agreement.
Last modified: Wednesday, 21 October 2020, 4:16 PM