Under an intellectual property licensing agreement (also known as an intellectual property license or an intellectual property license agreement), you retain ownership of your patent, copyright, or trademark, but you give another party permission to use some or all of your intellectual property rights for a specific amount of time for a fee or royalty. These intellectual property contracts typically specify termination dates and procedures.
There are several types of intellectual property licenses embodied in a typical intellectual property agreement. The following three are the most common:
- Exclusive License. You agree not to grant any other licenses of the invention and rights concerned, as well as not to use the technology yourself.
- Sole License. You agree not to grant any other licenses of the invention and rights concerned, but you can use such rights yourself.
- Non-Exclusive License. You agree to give the licensee certain rights, but you also reserve the right to grant licenses of the invention and rights concerned to third parties or to use them yourself.
Licensing, as opposed to complete transfer or assignment of IP, provides the owner with several advantages. By retaining ownership, the seller (licensor) retains title and typically has an easier time reversing the transfer of rights if the buyer (licensee) doesn’t live up to its end of the bargain. In many instances, the party seeking to acquire the IP rights does not have sufficient financial resources to pay the full value upfront – or may perceive the IP as highly speculative but be willing to pay more if the technology can be successfully commercialized. A well-drafted license agreement therefore not only gives the licensor an opportunity to more readily terminate the agreement if future payments are not made but also allows the parties to “share in the upside.” License agreements can also delineate the responsibilities of each party for maintaining or enforcing the patent rights.
Thus, licensing allows greater flexibility and reduces the risk that the IP will be over or undervalued. If the desired revenue strategy is a stream of income, i.e., royalties or contingent payments, then licensing is often the most appropriate choice.
You can also combine elements of these three types of intellectual property agreements, such as by giving an intellectual property license for exclusive rights in certain geographic areas.
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