Intellectual property (such as patents, trademarks, copyright, trade secrets and know-how) can be licenced to third parties. A license is a means whereby a holder of rights in Intellectual Property (IP), the licensor, can obtain remuneration by allowing another person, the licensee, to use the IP rights.
There are various types of licences, for example:
A sole licence is where the proprietor of the intellectual property as well as the sole licensee is authorised to enter the market.
Only one licensee at the exclusion of the proprietor of the intellectual property has the right to enter the marketplace.
Proprietors may cross-licence different technologies or intellectual property to each other.
Licenses could be limited to a territory, an industry (i.e. you could license your building invention to home builders to use your invention for building private homes only and then license another party to use the invention for building commercial buildings), time periods, supply channels or the like. Combinations of the above and other types of licences are of course also possible.
A proprietor can derive remuneration from a licence in any of the following ways or a combination thereof:
- Once off licence fee/royalty
- Periodical licence fee/royalty (e.g. annual, quarterly or monthly)
- A running royalty based on sales/turnover etc.
We strongly recommend that formal licence agreements be entered into to regulate the rights and obligations of the parties (Licensor and Licensee). As indicated above, there are various licensing and royalty or payment options to consider. There are various other important considerations such as geographical limitations, minimum performance clauses, the enforcement of IP right in case of infringements by third parties, marking of products or services with official intellectual property numbers, and the like.