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Briefings > What is a licence?

Once you have protected intellectual property, be it a trade mark, design, copyright or patented technology, one common way of deriving commercial benefit and value from it is through licensing.

A licence is an authorisation allowing a third party to make and sell a product that otherwise would be prohibited as an infringement of your IP rights. Or in other words, you allow your IP to be used by another under terms agreed between you, usually resulting in you receiving payment through a royalty, lump-sum or both, whilst retaining ownership. This makes it different from an ‘Assignment’ which is when you transfer ownership.

The granting of a right to another in exchange for remuneration results in a ‘contract’. Such IP contracts (which could be an oral unwritten agreement - but should be written) are not regulated by the UK Intellectual Property Office, but by UK contract law and the civil courts.

Licensing makes a lot of sense to a technology company, for example, that is good at R&D (Research and Development) but has no or limited human and financial resources to take a technology to market. There may be several potential licensees who are looking for such a technology, perhaps as an add-on to some already existing product or technology, who themselves do not have R&D capabilities. Or it makes sense to a company with a branded enterprise looking for expansion through franchising, such as a restaurant chain. Or to an author who might wish to license their copyright for the purpose of a drama production, a film or merchandise. Think of Harry Potter...

Issues to consider when licensing are first, who your partner in licensing is going to be, then the scope of the licence, and other matters such as duration and termination.

Enthusiasm at finding a licensing partner should not prevent thorough due diligence and the need to consider post-deal management of the relationship. Will the licensee - if you are the holder of the IP (the licensor) - really make best efforts to exploit your IP, with buy-in from all levels of management, and not losing interest or focus a year or two down the line?

Regarding scope, is the licence going to be exclusive or non-exclusive? What territories will it cover, and what parts of your IP will be granted (your IP rights are potentially divisible)? How will remuneration work, and how do you calculate a fair price for the licence? How will you manage risk factors? What happens if things go wrong? These are all issues (amongst others) that have to be thought through carefully and agreed in advance.

Cam Trade Marks advises on licensing. Please contact us if you wish to discuss your licensing needs with us, whether as licensor or as licensee.

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