Knowing how to license intellectual property can be extremely important if you're planning to invest in intellectual property or to develop your own for commercial use.

What Are Intellectual Property Rights?

The rights to intellectual property is a rather broad topic that encompasses aspects such as:  

  • Patents  
  • Trade secrets  
  • Operational knowledge  
  • Proprietary information and data  
  • Registered designs  
  • Copyrights  
  • Trademarks.

In most cases, these rights will belong to a commercial entity. Typically, the rights will remain with the owner throughout the intellectual property's lifetime. They can legally be used as leverage against competing companies.

What Is an Intellectual Property License?

Licenses can also be thought of as contracts. These contracts are used to determine what licensees are able to do with the intellectual property in question. In essence, a license agreement serves as a partnership between:

  • The legal owners of an intellectual property ("licensor")
  • An individual or legal entity (“licensee”) that is authorized to use certain rights or in exchange for agreed-upon royalties or fees.

Once a license has been issued, the licensee must adhere to the terms outlined in the license agreement. Failure to do so is considered an infringement and may warrant patent-infringement-lawsuit">potential legal action. For example, a common patent license will typically specify the following:  

  • The specific rights granted to the licensee  
  • The terms of these rights  
  • Considerations to be received in exchange for these rights  
  • Records  
  • Reporting  
  • Representations regarding the patent  
  • Any applicable warranties  
  • The way in which infringement will be addressed.

Keep Good Records

It's a good idea to start a habit of keeping a complete and centralized collection of your agreement files. Doing so will provide you with a couple of key advantages: 

  • If a dispute arises regarding a particular license, whoever has a better recordkeeping system usually stands a better chance of coming out on top. 
  • If you ever decide to sell your company, good recordkeeping will make it much easier for any potential buyers to conduct their due diligence on their potential investment. It also increases the perceived legitimacy of your company in the eyes of potential buyers.

In simple terms, according to adjunct professor of property licensing at William Mitchell School of Law, David Kagan, good recordkeeping can help to increase your company's overall value.

Be Diligent About Enforcement From the Start

In many cases, inventors mistakenly believe they'll start experiencing financial gains as soon as they obtain a patent. However, it is important to understand the full amount of work that is involved in enforcing a patent. Once you've obtained your patent, you'll need to pay special attention to interested parties that may actually end up using your invention. 

Activities that may be considered to be an infringement don't need to be intentional. Whether somebody does it on purpose or not, infringement is always a possibility that you need to be aware of. 

Pursuing legal action against infringement has no intent requirements. In most cases, if somebody is guilty of committing infringement against your patent, he or she is not going to come to you and admit it. It's important to keep an eye out for your invention appearing in competing services and products. This can be challenging from a logistical standpoint, but it should not be overlooked.

According to Chief Patent Counsel for IBM, Manny Schecter, it's important to:

  • Remain aware of the possibility of your invention appearing in a number of potential fields
  • Keep track of where it is being put to use.

Keep Long-Term Relationships in Mind

It's also important to have an understanding of areas that allow room for negotiation and those that the other party simply can't offer any wiggle room for. Failure to understand these things can result in a loss of goodwill and can ultimately become a waste of time. 

A license agreement is not like other financial transactions you may be used to. It's not possible, for example, simply to get the best possible deal and never have to deal with the other party again. In fact, you're going to be in each other's business lives for the foreseeable future.

This makes it extremely important to foster goodwill between yourself and other interested parties. Your business relationship is long term.

If you need help with how to license intellectual property, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.