The IP licensing strategy is an effective method towards completing business goals. You might be interested in expanding a current business, starting a new one, or improving the quality of your goods or services. Licensing should be a part of your business strategy if you own intellectual property.

An IP license contract is a partnership between the owner of the intellectual property (licensor) and another party (licensee) who wants to use the intellectual property. The contract usually describes that the licensee can use the intellectual property in different applications by paying a certain royalty to the licensor.

Intellectual Property Licensing Strategy Basics

There are a number of licensing agreements including:

  • Copyright license agreement
  • Technology license agreement
  • Trademark licensing and franchising agreement

All or some of these contract types form one contract since, in these kinds of transfers, many rights are involved and not just one kind of intellectual property. Licensing contracts can also occur during acquisition, merger, or a joint venture negotiation. As an owner and licensor of intellectual property, your small to medium-sized business can expand and ensure an additional stream of income. While as a licensee, your business can import, export, sell, distribute, or manufacture a variety of services or goods.

A formal licensing contract is only possible if the property rights can also be transferred to other countries of your interest. If the intellectual property is not protected in other countries, then you won't be able to license it or place a restriction on anyone to use it. By licensing your intellectual property, you open up yourself to more customers, which means more money for future inventions.

Keys to Licensing Intellectual Property

There are general principles that those involved in licensing deals should keep in mind:

  • A lot of groundwork must be done before beginning a partnership process with a licensee.
  • While identifying which intellectual property will be licensed, a company licensing team must also be established.
  • The right kind of organizational structure must be done according to the type of business you have and the amount of intellectual property available to license.
  • Choose people for your corporate licensing team who have a positive business mindset, and give them the authority and tools to succeed.
  • Insist to your corporate licensing team to improve the company's bottom line by looking for a fair deal, both for your company and the licensee.

Intellectual Property Licensing Tips

  • Keep organized records: If a dispute occurs, the party who is better organized has an advantage. Second, if you ever want to sell your business in the future, a potential buyer can do a due diligence and have a positive effect by enhancing the business value.
  • Be good at enforcement from the beginning: As an inventor, you have to be diligent about who is using your patent and manage your portfolio effectively, which can be challenging. You have to know what inventions are coming out and what is being used in different areas.
  • Embrace long-term relationships: When you get into a licensing agreement, you will be in it for a long time with your partner or licensee, as the business and circumstances change.
  • Test the quality of the property before licensing and maintain it: You want to have a proven product that you are comfortable producing in large quantities.
  • Assume the contract is negotiable: if you read something in the contract that is ambiguous or unreasonable, say something as companies don't mind negotiation for the right reasons.
  • Be careful with exclusivity: it's important to not sell yourself completely to a company if you don't know the potential of your intellectual property.
  • Describe and place an importance on deal limitations: You have to define the deal parameters for each side and assign an importance to each, especially for the licensor, to understand how he will use the license.
  • Price flexibility: Be prepared to negotiate the price and the type and time of payments. The licensor will have a positive outlook on the market and the licensee will be more conservative.
  • Be aware of different purposes: there will be competing purposes. You have to understand the kind of company you're dealing with and their requirements.
  • Be warned of what could happen to a license: Make sure that in the event of bankruptcy or insolvency, the license expires.

If you need help with an intellectual property licensing strategy, 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, Stripe, and Twilio.