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Licensing Intellectual Property Rights

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Intellectual property rights can be licenced, and this is a common way to exploit the goodwill and reputation (or potential for a goodwill and reputation to be developed) in your creations. By protecting your creation (which could, for example, be a creative design or invention), you can grant licensees the right to manufacture your protected product for their own sales, in return for royalties. Choosing to grant such a licence will have the benefit of allowing your product to reach a bigger market, which can improve your business reputation associated with your product/services and also provide you with further income.

A licence is essentially a permission to do something that, without the licence, would be an infringement of intellectual property. The person granting the licence is usually called the licensor, and the person receiving the licence is usually called the licensee. There could also be more than one licensor or licensee named in the agreement. The terms and conditions on which the intellectual property is licenced are varied and both parties usually agree these terms and conditions via negotiation. Obviously if you own the intellectual property that you are licencing, you will have a higher level of bargaining power and will be able to obtain favourable terms within the agreement.

Intellectual property licences generally operate in one of the following ways:

  1. Exclusive Licence: Only the licensee can use the licensed rights. The licensor cannot use the licensed rights or grant any further licences within the scope of the original grant. This is the best form of licence for a licensee, as only it will be able to exploit the licensed rights.
  2. Non-Exclusive Licence: The licensor can use the licensed rights and can grant any number of non-exclusive licences. This is the weakest form of licence for a licensee, as the licensor can exploit the licensed rights and also appoint third parties to do so (possibly even competitors of the first licensee).
  3. Sole Licence: Only the licensor and sole licensee can use the licenced rights. The licensor cannot grant any further licences within the scope of the original grant. This is commonly an acceptable middle ground, as under this approach only the licensor and licensee can exploit the licensed rights.

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FAQs

Can you use someone else’s intellectual property?
 
 

You can use someone else's intellectual property if they transfer the intellectual property to you by way of selling or assigning the intellectual property to you, or if they give you permission via a licence.

If you proceed to use someone else's intellectual property without permission, you will likely be infringing on that person's intellectual property rights and this could lead to intellectual property offences.

Why should I licence or take a licence of intellectual property?
 
 

There are a number of benefits to licencing your intellectual property, including:

  1. If you are licencing your intellectual property to a company that is going to manufacture and sell the products, you receive revenues from that licencing, but you do not take the risk of manufacturing, promoting and selling those products. This risk would lie with the licensee. This works both ways, because the licensee would also have the right to use the intellectual property without the expense and risk of the research creating the intellectual property and the relative costs involved.
  2. Granting licences in respect of your intellectual property allows you to obtain additional income from someone else to commercialise it in a different field.
  3. You may be able to licence another business to sell licensed products within territories that you yourself cannot cover, allowing the expansion of your intellectual property.
  4. You may want to 'buy-in' innovation to reduce your research and development costs.
  5. By using a licence to use already existing intellectual property, this would allow any business to potentially get its products and/or services to market more quickly, as they would be able to bypass the inventing intellectual property portion.
  6. You could also obtain an advantage over competitors by obtaining a licence to existing intellectual property.
  7. You may also want to collaborate with other businesses to work together to create new products and/or services.
How do I know whether I should take acquire a licence?
 
 

If you are thinking about taking or granting a licence of any intellectual property, the first step would be to assess the needs and objectives of your own business and how, if you were to gain a licence, would this help meet your needs and objectives. You also need to take into account that should you want to use someone else's intellectual property, you require a licence to ensure you do not infringe the owner's rights. Furthermore, the Trade Marks Act 1994 states that in order to be valid, a trade mark licence must be signed and in writing.

Often enough, taking a licence will bring a number of advantages to your business or it may even be the corner stone of your business, but they are not always appropriate. This may be because:

  1. You have your own ability to commercialise your own intellectual property;
  2. The value of the intellectual property you wish to licence may be diminished;
  3. The royalties are too high and may restrict growth;
  4. Intellectual property you wish to licence may be too weak; or
  5. The intellectual property to be licenced may not be valid.
How do I prepare for negotiations when it comes to licencing?
 
 

You need to consider how the license is going to earn a return for you. You need to be aware and have an understanding of the market for the intellectual property before you proceed to negotiate. If you are the licensor you need to also think about what you want in return for the licence, is it simply monetary or is it some other commercial benefit? Our intellectual property solicitors will be able to assist you with this and will be able to carry out the due diligence that is involved.

What should I consider about the terms of a licence?
 
 

There are a number of things to consider when it comes to the terms of a licence and not all of them may be relevant, but the below list is some of the key considerations:

  1. Can the licensee grant permission to others to use the intellectual property?
  2. Are there any terms that must be carried through to any sub-licence?
  3. Is the licensee restricted to using the intellectual property for particular uses?
  4. Is the licence restricted to one or more specified field or use?
  5. Is the licence restricted in regard to territories?
  6. Can the licence be assigned to someone else?
  7. Can the licensee have others manufacture and sell products?
  8. Can the licensee import products protected by the licenced intellectual property?
  9. Can the licensee make improvements to an invention?
  10. Is licencing back any translation or improvements to be agreed?
  11. Which party is responsible for protecting the intellectual property and what happens if the parties become aware of third-party unauthorised use?
  12. Will any warranties or indemnities be provided regarding the validity of the intellectual property?

The more specific you are with the other party the better, and once you have been specific about the permitted uses of the intellectual property the licensor can reserve all other rights to itself. Our intellectual property solicitors will fully discuss the terms of any proposed intellectual property licence with you, following which we can draft the required licence in order to ensure that your requirements are met.

How long does a licence last?
 
 

A prospective party to a licence of intellectual property rights needs to consider the duration of the licence. If a licence is silent or ambiguous about its duration, the duration may be difficult to predict. This may result in adverse commercial consequences for at least one of the parties.

You will need to check this accordingly with the duration of the intellectual property and discuss the duration of the licence with the other party. Intellectual property rights generally endure for a limited period of time only (with the potential exception of trade marks and confidential information in certain circumstances). An intellectual property right's licence will therefore expire with the expiry of the intellectual property rights. Parties to a licence agreement will usually agree for the duration of the agreement to be equal to the term of the underlying intellectual property rights or less.

What is a sub-licence?
 
 

Sub-licences of intellectual property rights allow a licensee to grant licences to third parties to use the intellectual property in their own right, without reference to the right-owner, who is the ultimate licensor of the rights, although sometimes a sub-licensee may also enter into a supplemental agreement direct with the rights-owner at the time of later when the head-licence is terminated.

If you wish to sub-licence, you need to specify this within your licencing agreement. The benefits of this is that it allows you to obtain addition revenues of profit from the sub-licensee and allows your intellectual property to grow within a market or industry. Granting sub-licences may allow your creation to spread widely across a number of different geographical locations and increase your own reputation.

When sub-licencing there are a number of complex issues which need to be considered including details terms that address the conditions of the licence. Our intellectual property solicitors will be able to discuss and advise you accordingly on this.

Under English law, sub-licencing of intellectual property rights is not permitted unless expressly stated. It is important to deal specifically in the licence whether or not sub-licencing is permitted.

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