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How Licensing Your IP Rights Can Strengthen Your Business in the UK

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Intellectual property rights are crucial tools for any business in the UK. They provide the owner of the IP rights with exclusivity over usage and the power to challenge others with legal action. Licensing IP rights allow you to permit others to use your exclusive rights under certain conditions and for a fee. A licence agreement can be beneficial both financially and also for the reputation of your business. This article will discuss the benefits of licensing your IP.

What is IP?

Intellectual property, also known as IP, are intangible assets often owned by businesses. IP rights that stem from this are valuable assets for a business to possess and can take many different forms, including:

IP rights apply to intangible property, but you can still sell or licence them the same way as physical property. If your business chooses to sell intellectual property, the ownership of the property completely transfers to the buyer. In contrast, granting an IP licence allows the licence holder to still maintain ownership. However, licensing grants others permission to use the IP in agreed ways that would otherwise be deemed an infringement of your business’ IP rights.

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What is a Licensing Agreement?

A licence agreement is a contract between two parties that permits the licensee to use the IP of the licensor in agreed ways for a determined fee.

For example, Starbucks and Nestlé entered into a licensing agreement in 2018 which allowed Nestlé to manufacture and sell Starbucks packaged tea and coffee across multiple countries across the world. The deal was worth over $7 billion.

The size of this deal reflects the idea that IP rights are often the most valuable part of your business.

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Benefits of Licensing Your IP Rights 

One major benefit of licensing your IP is that it will increase your distribution and often provide your business with a greater geographical reach. This will not only allow you to widely distribute your products but will also increase your visibility among consumers. 

If your business produces a high-quality product that consumers purchase across the globe, your business’ reputation will be impacted in a positive way. This can be particularly useful if you are considering building momentum behind your brand before the launch of new products, designs or services.

If you are a small business, licensing could also assist you in taking advantage of the licensee’s manufacturing links. As a small business, you may not have built up an established method of mass production for your product. Therefore, licensing can help you to produce a higher volume of products than you would otherwise be able to produce.

Licensing is a form of generating income without losing your assets. The stronger your brand, the greater your intellectual property will be worth. If your business is well established, your IP rights will carry a higher price tag.

For example, suppose your logo is a registered trade mark. In that case, you could enter into a licensing agreement to allow another brand to use your trade mark on their products as a collaboration of the two businesses.

Drawing Up a Licensing Agreement

You should draft licensing agreements with great care and attention to detail. It is highly advisable to obtain a professional legal opinion and instruct an intellectual property solicitor to draft the final contract. Otherwise, you risk overlooking key details necessary to protect your business interests. 

For example, you may wish for your contract to have a non-disclosure agreement within it. A non-disclosure agreement is important when protecting your business’ confidential information. This would then be enforceable with legal action if the licensee were to breach it.

Key Takeaways

Intellectual property rights are important assets to businesses in the UK of any size. They provide exclusivity over your intellectual property meaning only your business can use it. A licensing agreement is a contract that allows the licensee to use the licensor’s IP rights in agreed ways for an agreed fee. Your business can benefit from licensing your IP rights to others as it allows you to expand your geographical reach for the distribution of your products or services and build your reputation. 

If you need help or advice around a licensing agreement, our experienced intellectual property lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions

How does a company benefit from licensing its intellectual property?

A company can benefit from financial income from licensing through the agreed fee between both parties. You can also benefit from building your brand and reputation across a wide market and increasing distribution.

How does intellectual property promote business growth?

Intellectual property helps a brand build its reputation and creates legal protection for that business against competitors. Intellectual property is a useful tool in creating a consistent brand strategy that will ultimately increase consumer trust and grow your business.

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Fiona Prior

Fiona Prior

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