What is an IP License and when might you consider licensing Intellectual Property (IP)?
An intellectual property licensing agreement typically occurs between an IP rights owner (“licensor”) and someone who is authorized to use the rights (“licensee”) in exchange for monetary value in the form of a fee or a royalty, or both.
Typically a licensor will have had his or her intellectual property rights valued, prior to entering into a IP license negotiation, to ensure the terms of the license reflect a sharing of the risk and rewards, associated with exploiting the IP rights in the designated territory. The two parties agree on the terms and conditions via negotiation, with the outcome dependent upon the bargaining power of each side and the value of the commercial opportunity and profits that the IP unlocks.
The licensor is always the owner of the licensed IP, and one license can cover a bundle of IP rights including patents and design rights, related know-how, and a trademark. The agreement between the two parties can allow the licensor to share some risk, for example by tapping into the licensee’s productive capacity and relevant local expertise and so in simple terms, sharing the risk and profits through the license agreement.
What to consider when licensing Intellectual Property?
There are many factors to be considered including:
- Exclusivity (which usually comes with an upfront fee)
- Use (in which market)
- Territory
- Enforcement of intellectual property rights and ongoing payment of IP maintenance and protection fees
- Time period (sometimes linked to the expiration of a patent or the useful life of the IP assets)
- Background IP (brought to the licensing partnership) & Foreground IP (usually created as a result of licensing partnership)
- Rights to Future Developments
- Any services or support provided by licensor along with assets
- Rights to assign, sublicense or terminate the license
There are many reasons a company will consider IP licensing, beyond the commercial growth or business expansion opportunities noted above– for example, it may be that the company has an intellectual property it considers non-core and so is considering licensing it out to another party who sees an opportunity and is interested in exploiting the particular technology.
The benefits and attractions of an Intellectual Property licensing arrangement include:
- Providing easier access for your products or services into a new market or geographical territory
- Allowing the commercial risks of entering the new market to be shared
- creating additional revenue streams
- increasing market share
- gaining access to local expertise in the target market
- broadening your competitive advantage
- increasing collaboration opportunities; and
- the opportunity to minimize capital investment and risk when entering a new market.
The type of Intellectual Property assets which can be the subject of an IP licensing agreement can include:
- Trademarks to “brand” products and services
- Patents to allow the manufacture or sales of technology (goods and processes)
- Registered product designs
- Copyright for literature or artistic work; and
- Confidential information or know-how
We are often asked for advice and support in intellectual property license negotiations. In particular, we are asked to provide:
- A intellectual property valuation with comparable royalty rate analysis, to guide the negotiation of license fees and royalties
- Advice on specific license terms to include/exclude, which are reflective of the circ*mstances, the required business objectives and opportunities afforded by the licensed IP rights
- Advice on how to structure and tactically execute a licensing transaction
- Insights into markets to guide and influence choosing licensing partners
- Support to business owners and their attorneys drafting license agreements including those between connected parties which may be subject to transfer pricing rules
To find out how we can help you in licensing intellectual property, contact us at info@metispartners.com. Through the experts at Metis Partners you can learn about Intellectual Property strategies in addition to formal intellectual properties such as copyrights, designs, and trademarks. While you’re here, feel free to check out our intellectual property sold and our intellectual property for sale sections too!
FAQs
An intellectual property licensing agreement typically occurs between an IP rights owner (“licensor”) and someone who is authorized to use the rights (“licensee”) in exchange for monetary value in the form of a fee or a royalty, or both.
What does intellectual property licensing mean? ›
It is an agreement between the licensor (the person or company owning the intellectual property) and the licensee (the person or company wanting to use the intellectual property).
What are the intellectual property rights in a partnership agreement? ›
A partnership contract is a legal agreement that defines the roles, responsibilities, and rights of two or more parties who collaborate on a business venture. It can also help to protect your intellectual property (IP) and confidential information from unauthorized use or disclosure by your partner or third parties.
Can two people own intellectual property? ›
While it is legal for IP to be jointly owned by more than one entity, and this sometimes seems to be an easy and inexpensive solution to a collaboration, joint ownership of IP can create significant problems and should be avoided whenever possible.
What is a license to use intellectual property clause? ›
License of Intellectual Property Each Party (a “Licensor”) grants the other Party (a “Licensee”) the non-exclusive, royalty-free, paid-up, worldwide, irrevocable, right, during the term of this Agreement, to use the Licensor's Intellectual Property solely for the purposes of this Agreement and to carry out the Party's ...
What is intellectual property in simple words? ›
What is intellectual property? Intellectual property refers to any intellectual creation, such as literary works, artistic works, inventions, designs, symbols, names, images, computer code, etc. Intellectual property law exists in order to protect the creators and covers areas of copyright, trademark law, and patents.
What qualifies intellectual property? ›
Intellectual property is a category of intangible assets. They can't be held and don't necessarily have a physical presence. These assets are created using human intellect. Such property can take many forms and can include artwork, symbols, logos, brand names, and designs.
Who owns intellectual property in a partnership? ›
Of course, partnerships are owned and controlled by the individual business partners. When a partnership owns IP, the individual business partners effectively have collective ownership over the asset.
Who owns intellectual property if no agreement? ›
Copyrights: The creator of a work is usually the owner of the copyright, although in some cases, the copyright may be owned by the employer if the work was created within the scope of the employee's employment.
How do you define intellectual property in a contract? ›
Designs, symbols, literary and artistic works, and images used in commerce all fall under intellectual property. Trade secrets, such as how a company finishes a task, are also protected as intellectual property as is proprietary data, like customer lists.
Copyrights, or original works of art, are owned by the author who created the work; if multiple authors are involved, they are joint owners with an indivisible interest in the work. Patents — also known as inventions — are owned by the inventor.
What happens if someone uses your intellectual property? ›
Copyright, trademark and patent infringement can all be handled in civil court. Depending on the facts of your case, the damage you have suffered and other factors, you may be able to get: An injunction to stop the person from continuing to use your IP, including removing a product from market. Payment of your losses.
Why avoid joint ownership of IP? ›
The licensing of jointly owned patents dilutes the value for both owners if a license is available from both owners. There is no effective means to grant a covenant not to sue or a non-assert.
What is the difference between IP ownership and license? ›
The person who owns the IP at issue is the “licensor,” and the person receiving the right to use that IP is the “licensee.” Since the language of a license dictates what the licensee may and may not do with the licensor's IP, lawyers have developed some standard terms that are used to specify the outer reaches of a ...
What is an example of licensing intellectual property? ›
Some common examples of assignments and licensing of intellectual property include an author who licenses her copyrighted novel to a publisher for a time or a software developer that purchases the right to incorporate code created and owned by another into one of its products.
What is a license agreement intellectual property? ›
An intellectual property licensing agreement allows a person to retain ownership of a patent, trademark, or copyright but gives another party permission to use some or all of their intellectual property rights for a specific amount of time for a fee or royalty.
What is IP in terms of 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.
What is the difference between copyright and intellectual property? ›
Copyright is a mechanisms that can be used to protect the tangible expressions of your intellectual property. Copyright applies to particular literary and artistic works, but doesn't cover ideas, methods, designs or other intangible ideas. These may be protected by other aspects of IP law.
What does owning intellectual property mean? ›
Intellectual property (IP) pertains to any original creation of the human intellect such as artistic, literary, technical, or scientific creation. Intellectual property rights (IPR) refers to the legal rights given to the inventor or creator to protect his invention or creation for a certain period of time.
What does intellectual property allow you to do? ›
IP rights are important because they encourage creativity and innovation. By giving inventors and creators exclusive rights to their work, intellectual property laws allow them to profit from their investments and recoup their research and development costs.
