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Entering intellectual property (IP) licensing agreements is common in business dealings in the UK. An IP licence agreement allows the owner of intellectual property, the IP owner, to license different types of IP to another business without losing ownership. It is a contractual agreement governing the temporary use of your IP. This article explores what an IP licence is, how it can benefit your business and the key elements to cover.
What is a Licence Agreement?
Licence agreements are formal contracts between two parties regarding the use of intellectual property for a fee. The creator or owner of the IP will be the licensor, and the other party to the contract will be the licensee.
You can choose to license any type of IP, including:
- trade marks;
- design rights;
- trade secrets
- copyright; and
- patents.
Likewise, your licence agreement can cover key details, such as:
- how your IP will be used;
- details on whether you will require a fixed fee or royalties;
- any restrictions you wish to put in place for usage; and
- any non-disclosure issues regarding confidential information.
These are just a few examples of considerations for your business before entering into a contract regarding your IP rights. Protecting your IP rights when licensing is critical, as ultimately, your reputation is at stake when agreeing to allow other businesses to use your IP.
How a Licensing Agreement Can Benefit Your Business
As the IP owner, you will possess intellectual property rights and, therefore, can hold exclusive rights over its use. However, within licence agreements, you can opt to have different forms of exclusivity over the IP in question.
You can decide what type of exclusivity to grant over the IP within your agreement. Often, these decisions will involve negotiation with the licensee. As such, obtaining legal advice is highly advisable to ensure your legal and commercial position is not compromised.
Additionally, an IP licence can be beneficial for your business as the IP owner, including:
- providing you with an income;
- increasing brand awareness in new markets;
- utilising manufacturing links;
- obtaining a greater distribution of your products; and
- building your reputation among consumers internationally.
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Key Terms to Include
The specific terms of your licence agreement should be tailored to the kind of IP you are licensing and what rights you wish to protect. There is no one-size-fits-all licence agreement you can copy and use for your business. However, general points you should include are the following:
- what intellectual property is being licensed;
- rights granted over the intellectual property;
- any restrictions or limitations on usage; and
- fee payment.
Each key point involves attention to detail, as you can make mistakes or miss crucial details you intend to include. Likewise, intellectual property law can be challenging to navigate. Therefore, it is advisable to seek the advice of an intellectual property lawyer so that your licence agreement is drafted accurately and in your favour.
LegalVision’s Trade Mark Essentials Guide provides valuable information for any business looking to register or enforce a trade mark.
Key Takeaways
Intellectual property licence agreements are formal contractual agreements that allow businesses to transfer IP rights temporarily to others for an agreed fee. Licensing creates a legitimate contract between two parties that specifies how the licensee can legally use the IP.
The licensor is often the IP creator and can benefit in a financial and reputational way from entering into an IP licence agreement. It allows the licensor to access the licensee’s manufacturing and distribution processes, for example, allowing for greater business expansion. However, licence agreements are detailed contracts and should contain clear and exact wording. Otherwise, you risk signing an agreement that does not offer your business the protection you intended.
For assistance drafting 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
It is a contractual agreement between two parties where the licensor allows the licensee to use their intellectual property in agreed ways for a specific period and fee.
You should include details of the intellectual property you are allowing the other party to use, as well as the terms of its use. Likewise, specify any restrictions on IP usage and the applicable fee.
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