What is Intellectual Property Rights?
A licensing agreement is a partnership between an intellectual property rights owner (licensor) and another who is authorized to use such rights (licensee) in exchange for an agreed payment (fee or royalty). A variety of such licensing agreements are available, which may be broadly categorized as follows:
- Technology License Agreement
- Trademark Licensing and Franchising Agreement
- Copyright License Agreement
In practice, all or some of these agreements often form part of one single contract since in transfers of this nature many rights are involved and not simply one type of intellectual property right. You may also come across licensing agreements in other circumstances, such as, during a merger or acquisition, or in the course of negotiating a joint venture.
All of these mechanisms either on their own or in combination will provide your SME, as a licensor or licensee, a wide variety of possibilities in conducting business in your own country or elsewhere. As an intellectual property owner and a licensor, your SME can expand its business to the frontiers of your partners’ business and ensure a steady stream of additional income. As a licensee, your SME can manufacture, sell, import, export, distribute and market various goods or services which it may be prevented from doing otherwise.
In the international context, a formal licensing agreement is possible only if the intellectual property right you wish to license is also protected in the other country or countries of interest to you. If your intellectual property is not protected in such other country or countries then you would not only not be able to license it, but also you would have no legal right to put any restriction on its use by anyone else.
Related Topic: Intellectual Property Management
The ten tips which favor IP Licensing are following;
- Keep good records: Get in the habit of establishing and maintaining complete centralized agreement files. You get at least two significant advantages by doing this. First, if a license dispute erupts, the party with better agreement files has a significant early advantage. Secondly, if you ever want to sell your business, accurate, and complete agreement file makes it easier for a potential buyer to conduct its due diligence while also enhancing how the potential buyer views your business.
- Be diligent about enforcement from the start: A lot of inventors are under the misperception that they get a patent and the money rolls in. They don’t realize there’s a lot of work that goes into enforcing a patent. Once you get a patent, you have to pay attention to who may actually be using your invention. Parties who infringe your patent don’t have to do it on purpose to be infringing. There’s no intent requirement of patent infringement.
- Keep long-term relation in mind: You need to start to understand what are negotiable points and what are they don’t even try because it’s our policy. You can’t waste a whole lot of time and a whole lot of goodwill. A license agreement isn’t like selling a used car. You don’t get the best deal you possibly can and run. Circumstances change, you need modifications, and you don’t know what your company’s going to look like in five years. You’ve got to leave good will and understanding on both sides because you’re going to be living with each other.
- Test quality before licensing it, maintain it after: If you’re buying a software package if you can you want to make sure it’s already been in production. If it’s possible, you want to talk to people who have used it. It’s kind of like building a house and talking to a contractor. It can be hard though because sometimes the references are your competitors. Ongoing support is really important too.
- Assume the license is negotiable: We do not make the change to our form agreement, is a phrase that companies like to use, but they really mean it. If you see something in the contract that is unreasonable, seems ambiguous or is flat out wrong, say something about it. Better yet, suggests something that works
- Navigate exclusivity carefully: One of the best things that happen with the startups and the company that is developing something new is that companies will want to incorporate their product line and will ask for exclusivity. Exclusivity has come up as the No. 1 point of contention in negotiations. I don’t think it’s fair to say avoid it completely. You just can’t unless you are going to be able to wield enough power in the marketplace to say everybody’s going to have this thing.
- Define and prioritize deal boundaries: We begin by understanding the business application on both sides and by defining the deal parameter which may include assigning patents, licensing patents, for the field of use or technology transfer, copyright, royalties, etc. However, it is vitally important to understand what value the licensor puts on these different parameters.
- Be Flexible on Price: Be prepared to negotiate on the price and be flexible on the type and timing of patent. Many patent types are used such as upfront, lump-sum, milestone payments for achieving the product development for commercialization goals, or running royalty after commercialization.
- Recognize different agendas: The tech transfer offices are perceived as greedy and obstructionist; companies or the industry is perceived as being stingy and obstructionist. So the common ground is not necessarily a good common ground. You’ve got competing agendas: Larger tech transfer offices are being perceived and being tasked with being revenue-generating. You also have attitudes at some institutions that want lots of money up front: lots of licensing, fees, costs covered.
- Beware of what could happen to the license: If you enter into a paid-up license beware of assignment right, in the event a smaller licensee is acquired in the future by a larger company, if the license is assignable, the larger company may get a license without having to pay a dime to the patent owner.