Key Takeaways

  • IP leasing allows owners to generate income while retaining ownership and control over their intellectual property assets.

  • Leasing agreements are short-term agreements with terms spelling out how the underlying work may be used, unlike licenses, which sometimes leave the rights to the user for longer.

  • Intellectual property assets that can be leased include patents, trademarks, copyrights, and trade secrets. The type of asset most suitable for licensing depends on the industry and use.

  • Important elements of an IP lease agreement include the scope of use, the lease term, payment details, termination clauses, and provisions for protecting confidential information.

  • IP leasing can benefit both owners and lessees: the former can earn passive income without losing ownership, and the latter can gain access to valuable IP without a long-term commitment.

  • To avoid any potential leasing of IP to unnecessary disclosure, your lease should also contain confidentiality clauses.

  • Common pitfalls in IP leasing involve unclear usage terms, a lack of defined renewal conditions, and IP undervaluation, which can potentially lead to disputes and lost revenue.

  • A lawyer specializing in intellectual property will be necessary to protect your interests and ensure the lease meets your financial goals.

  • Post a job on UpCounsel to find an IP attorney in your state. 

IP leasing is a growing strategy that can provide owners with a predictable income from their intellectual property while maintaining control over its use. IP leasing allows a shorter access term with a specific usage agreement than licensing, which is a longer-term use agreement.  

This article will discuss IP leasing, how it differs from IP licensing, the kind of IP that can be leased, and how an IP owner can create a secure lease agreement.


What Is Leasing Intellectual Property?

Leasing intellectual property is much like renting.  

The owner (lessor) grants another person or entity (lessee) the temporary right to use the IP for a specified time and purpose. The owner retains ownership of the asset throughout.  

Among the various intangible asset ownership structures, leasing is more limited and less wide-ranging than licensing – which often grants the persons or entities with licenses the right to use the invention.  

With licensing, the rights to use the invention tend to be broader and more long-term than with leasing. IP leasing is useful when the owner seeks to retain close control over the asset while capturing its immediate market value. 

For example, a company might hold a patent for a new technology and lease it to another business for a short-term project.  

The lessee gains access to the innovation without the responsibility of ownership or a long-term commitment and revenue from leasing without relinquishing IP.  

The parties benefit from flexibility as they negotiate terms to meet the needs of a particular project or timeframe.


Types of Intellectual Property That Can Be Leased

Every type of IP has benefits depending on the industry and the property's usage.  Below is an overview of the most common types of IP that can be leased.

Patents

Companies in the technology, engineering, and manufacturing sectors can lease patents to gain a monopoly over a process or an invention.  

This gives them access to the most advanced technology for a set period, allowing them to benefit from innovation without owning it.  

This might be especially relevant to industries where innovation must be rapid, and leased patents could give a particular project a competitive advantage.

Trademarks

Trademarks protect a brand's proprietary identifiers, including names, logos, and slogans. Leasing trademarks allows franchisors to temporarily transfer the right to use the trademark to another company.  

Suppose a new company hopes to create its branding from scratch or become affiliated with an established brand by leasing the trademark from the owner. The trademark owner would benefit from maintaining control over the brand's image and value.

Copyrights 

Copyrights protect original works like literature, computer programs, art, and music, and copyright leasing can be useful for businesses needing temporary access to copyrighted material.  

For example, a movie studio looking to use music from a copyrighted song in a movie or an author wishing to lease content rights to a publisher can temporarily transfer the creative works to the lessee.  

Then, the lessee can use or distribute these works for a specific purpose while the creator maintains ownership.

Trade Secrets 

A trade secret is secret information (such as a business formula, recipe, or method) from which a business derives an advantage over competitors.  

Leasing out trade secrets can be complicated and have confidentiality risks, but leasing is possible if proper legal safeguards exist.  

Depending on the type of IP lease, there are different considerations, from capping usage to setting terms on protecting trade secrets to ensuring the asset works as it’s meant to. 

How to Create an Intellectual Lease Agreement

An IP lease agreement is an important document that protects the interests of the owner and the user.  

An effective IP lease agreement contains the following elements: 

Scope of Use 

This clause defines what the lessee is allowed to do with the IP.  

For example, an IP lease for a trademark might state whether it can be used on digital platforms, physical products, or only within certain geographic regions.  

Clear usage rules avoid ambiguity and ensure that IP is used for its intended purpose.

Length of the Lease and Renewal Terms 

State how long the lease will cover – such as a one-year lease with renewal options – so the lessee can use the IP for one year, and then both parties can decide whether to renew.  

This helps avoid disputes over how long the IP can be used and sets expectations for renewal conditions in advance.

Payments

Specify how the lessee will pay for the IP. Depending on the IP and its revenue potential, this can include royalties (a percentage) or other financial arrangements.  

Be sure to specify how the payments will be designed to reflect the IP's market value and the parties' needs.

Termination Clauses 

The termination clause spells out the circumstances under which the lease might end, such as failure to pay, misuse of IP, or breach of contract.  

This protects the owner’s rights, clearly outlining why an owner can end the lease if there is a contract breach or IP misuse.

Confidentiality and Restrictions on Use

This section can be especially important if the IP is a trade secret or proprietary information. It can detail how the lessee is supposed to keep confidential details safe.  

Such clauses also help ensure the value of the IP isn’t eroded if it is shared without authorization or sublicensed. 

Clear and well‑defined terms maintain the value of the IP by giving the lessee the flexibility required to use the asset effectively.

Leasing Intellectual Property vs. Licensing

While leasing and licensing both give the user rights to use IP, there are some important differences:

Control

A leasing arrangement allows the IP owner to maintain more control over how the asset is used. Still, the licensee can potentially use the IP more freely under broader terms and conditions.  

Leasing may suit one-off or limited use cases, whereas licensing may suit ongoing or widespread use.

Term 

Leases are typically short-term, with set end dates and potential for renewal. Licenses are usually longer-term, providing the licensor with more stable access to the IP.  

Leasing works well for temporary use, while licensing is better suited to a more assured, longer-term arrangement.

Revenue 

While both can generate revenue, leasing might be more suitable for someone who wants to establish a reliable, recurring income stream.  

An exclusive license grants the licensee greater freedom of action, whereas a lease allows the lessor to more effectively control its IP. 

The difference between leasing and licensing will be determined by the ‘user’s’ (often the lessee’s) needs and the IP owner’s goals. The benefits of each will depend on the type and duration of usage.

Benefits of Leasing Intellectual Property

IP leasing can be attractive for both IP owners and IP lessees.  

With the distinction of ownership (as opposed to licensors), owners can continue to enjoy passive income from their IP while monetizing those valuable assets for a specific timeframe, use, or project.  

Lessees, in turn, will have access to existing IP that may strengthen a lessee’s market presence or product offering without a long-term commitment.  

Focusing on IP leasing as an alternative method of sharing or transferring IP is also appealing. This path helps the owner maintain greater control over their intellectual property than licensing. 

In other words, leasing is more akin to a rental agreement than a license, which makes it a much more flexible and temporary alternative to licensing.

How to Protect Your Intellectual Property in a Lease Agreement

The IP owner must plan and negotiate certain legal protections when leasing IP.  

Confidentiality provisions are one option for protecting IP. They are particularly common for trade secrets, as they limit sensitive information to a particular process or to a specific individual.  

The owner should also monitor IP usage periodically to ensure the IP is being used only as agreed.  

Furthermore, the IP owner should also include strict boundaries for IP use in the lease agreement. These boundaries ensure the IP is not shared, sublicensed, or used in any way not prescribed in the lease agreement.

Common Mistakes in Leasing Intellectual Property

Not specifying the exact terms of use is one of the most common mistakes when leasing IP. 

Unspecified usage could lead to the use of intellectual property in ways that do not conform to the owner’s original intentions. 

A second common mistake in leasing IP is failing to stipulate renewal terms. Once the initial term of the lease is reached, there may be confusion about whether or not the lease will continue.  

Finally, failing to assess current market conditions can result in undervaluing the IP. This impacts the lease's revenue and leaves potential earnings untapped.

Legal Help with IP Leasing

Leasing IP allows for a flexible, revenue-generating arrangement that enables owners to leverage their assets while retaining control.  

With well-defined terms and goals, IP leasing benefits both parties and can enable project-based partnerships while ensuring an asset’s long-term value.  

IP leasing could be valuable to your IP strategy if correctly negotiated and protected by legal agreements.

Frequently Asked Questions

What Is An Intellectual Property Agreement?

An intellectual property agreement is a written contract that lays out the terms of use for intellectual property rights, including the right to use, share, or transfer an IP. It protects both the IP owner and the IP user.

Can You Lease A Patent?

Yes, there are plenty of leased patents. In fact, this is true of many technology and manufacturing patents, where companies are interested in only temporary access to some new solution rather than having to own it for years.

How To Get Paid For Intellectual Property?

Depending on the terms of the lease agreement, IP owners can receive royalties (a certain percentage of earnings), a flat fee, or a percentage of sales. 

Terms can also vary based on the IP type (e.g., a naming rights deal differs from a broadcasting rights deal), the IP's market value, and the owner's negotiations.

To ensure your assets are appropriately protected and you have the necessary legal agreements in place, find an intellectual property lawyer in your state by posting a job on UpCounsel.