The World Intellectual Property Organisation (WIPO) defines a license agreement as “a contractual agreement under which a licensor (owner of the IP) permits another (licensee) to use the IP right in an agreed way, and in exchange for an agreed payment (fee or royalty)”.
So, for example, if you are the owner of work protected by the intellectual property right (IPR) of design, you may be able to license out the use of your work to others to exploit commercially rather than do so yourself. The design right gives you exclusive control over the work.
“a contractual agreement under which a licensor (owner of the IP) permits another (licensee) to use the IP right in an agreed way, and in exchange for an agreed payment (fee or royalty)”
WIPO
You may be approached by a company that wants to license your design for a product or product range – or you may seek out a manufacturer who is willing to fund the development of your design into a saleable product, or to introduce it to new markets and territories that you might never be able to access.
In each case, you need to understand:
- The rights that you hold
- The rights you wish to license (you need not license all rights – for example, you might restrict the use of your design to Europe or for a particular type of product)
- The terms on which you are willing to license these rights.
Of course, as in many things in business, this last is a matter of negotiation between you as the licensor and the other person as the licensee – there are no hard and fast rules. Take advice from someone with licensing experience – the mistakes you avoid should more than cover their fees.
If you are responding to a licensing enquiry, clarify which products / designs are being sought for licensing and the uses to which it is intended they will be put – without this information, it is impossible to put a value on the licence.
If the other party offers you a licensing agreement they have prepared, talk to your solicitor before signing; if they ask you to prepare an agreement, again talk to your solicitor.
Keep things simple. It’s easy to lose a deal by complicating it with unnecessary and (viewed from the other side) unreasonable conditions. Only grant ‘exclusive’ licences in return for sensible upfront fees or guaranteed royalties.
If you want to commercialise your work by licensing it to other people, start by looking for companies that license-in products or designs. Look at what they license; try to talk to the designers they license from; understand the process before you make contact. Be willing to sacrifice financial returns from the initial products or designs you licence in order to build a long-term valuable relationship.