Licensing Intellectual Property

Licensing the Rights to Intellectual Property

Licensing Intellectual Property

As discussed in our article about intellectual property (IP), it is an important asset for a business and so it needs to be protected. If a business has an opportunity to license their IP to another business, it can give them a leg up in the competition, as well as a way to passively earn a profit.

IP can refer to patents, which cover processes, technology, designs, and other original innovations or ideas. IP can also come in the form of copyright, which may be filed to lay claim to a logo, name, slogan, or other promotional materials.

Licensing the use of your intellectual property, particularly patents, can be a lucrative source of revenue for your business. However, it is important to preserve your business’s intellectual property from being overused and diluted.

Remaining Protected When Licensing Intellectual Property

When licensing your company’s IP, you’re essentially allowing another company to utilize a portion of your assets.

When you license your company’s intellectual property, you’re essentially allowing another company to utilize a portion of your assets. You must ensure that you are acting in the best interests of your business. Using a standard license form will almost never completely account for your company’s needs in the transaction. Using a standardized license may result in the failure to  adequately preserve your intellectual property rights.

Before you license your IP, you should take the following steps:

Examine your IP

Ensure that the IP you intend to license out is yours to begin with. Do you have contracts with your employees and independent contractors, for example, that give the company full rights and ownership in the IP? Check for a clear chain of title, or ownership history, as well as associated documents. You want to know everything there is to know about any potential flaws in the chain of title or liabilities on the IP. Additionally, you need to know how much your IP is really worth and its market potential. These details will help determine the best way to arrange the license.

Evaluate your potential licensee

You want to make money by licensing your IP, but you don’t want to harm your own market if you’re also using it. Without sufficient due diligence, it may be hard to determine whether your licensee will have an influence on your market presence.

Be aware that IP licensing is a long-term commitment. It’s critical to ensure that your licensee is a company with whom you wish to do business.  If you choose a successful licensee,  you could  increase your potential revenue. Conversely, if a  licensee is unable to make the most of the IP, you may suffer as well.

Set limits on the license

Don’t give your licensee carte blanche to do everything it wants with your IP. Set boundaries to prevent your licensee from harming your market or profiting from your IP in excess of the advantages you receive from the license. Always make sure you’re charging reasonable royalties and be cautious of offering an exclusive license.


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