Should I Assign or License My Intellectual Property?

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Table of Contents

• IP Assignment v IP Licence: What’s the Difference?
• Implications of Assigning Your IP
• Implications of Licencing Your IP
• Benefits of Commercialising Your IP Through an Assignment or Licence
• What If Someone Breaches an Assignment or Licence Agreement?
• Key Takeaways 
• Frequently Asked Questions

If you have registered a trade mark or patent with IP Australia, or if copyright subsists in your creative works, you should start commercialising your intellectual property (IP). As an IP owner, you have an exclusive right to assign or license your IP to another party for a specific purpose or period. It can be helpful to understand the difference between the two to determine which option best suits your goals. This article will explore your exclusive right to assign or license your registered IP.

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IP Assignment v IP Licence: What’s the Difference?

An IP assignment is a transfer of ownership of your IP in a particular work or invention to another entity. You may document this by way of a written agreement or a deed. 

By contrast, an IP licence should demarcate the terms and conditions you agree to allow another party to use your IP. A licence can be:

• express (explicit, written permission); 
• implied (in certain circumstances where you permit the use of your IP by consenting to them using your IP but not by way of formal agreement); 
• revocable or non-revocable (a revocable licence allows you to terminate it and withdraw your permission for the other party to use your IP); or
• exclusive or non-exclusive (an exclusive licence allows only one party, the licensee, to use the IP and excludes you as the licensor from using it). 

Implications of Assigning Your IP

When you assign your IP, you permanently transfer your right to use your IP (a non-revocable transfer) to a new owner. Further, you cannot impose performance obligations on the new owner. In other words, once the IP is assigned, you cannot determine what the new owner will do with it or how they will use it. 

Usually, this transfer is affected by a substantial lump-sum payment. The purchaser may pay royalties instead of a lump sum in which the initial payment will likely be less, and royalties are ongoing.

Commonly, sole business owners may seek to assign the IP they have personally developed to their new company (a separate legal entity). On top of contributing to your business’ IP portfolio, there are several commercially practical reasons why you may like to ensure your business assets are held by your company rather than you individually. We recommend consulting with a corporate lawyer for personalised advice.  

Implications of Licencing Your IP

When you licence your IP, you typically retain the rights to your IP. As a result, you will have greater control over negotiating the terms of the licence. Typically, a written licence agreement will cover this arrangement. Moreover, it would be helpful to consider including the following terms in your IP licence:

• exclusivity terms, where you negotiate whether the licensee (the person or entity gaining access to the use of your IP) has exclusive use of the licence, as it may be more commercially viable to licence your IP to multiple licensees; 
• duration of the licence, where you may negotiate a short-term licence or decide to limit the exclusive licence to a shorter period; 
• restrictions, where you can restrict the licence to a geographical space, a period of time or for a specified use; 
• termination, where you should include clear terms for how you may terminate the licence, as well as a dispute resolution process;
• fees which, depending on the value of your IP, you can negotiate the type of payment you will receive (e.g. flat-fee, periodic fee or on a royalty basis); and
• other matters, including confidentiality issues, performance obligations and inspection rights are also commonly included terms in licence agreements.

Benefits of Commercialising Your IP Through an Assignment or Licence

IP can be one of the most valuable assets of your business. Therefore, it can be commercially sensible to exploit your IP by assigning or licensing your rights in exchange for payment. 

You may also choose to license your IP as part of your broader business strategy to allow another business to market and sell your IP. For example, if you are setting up a franchise, you will want to be able to license your trade mark to your franchisees for marketing purposes. This relationship ensures your brand receives broader exposure while your franchisees leverage the goodwill and brand of the franchise.

What If Someone Breaches an Assignment or Licence Agreement?

If someone uses your IP beyond the terms of your agreement, they are doing so without your permission. Therefore, this is likely to be a breach of your intellectual property rights. For this reason, it is strongly recommended to set out the terms of your agreement in writing clearly. 

If someone uses your IP without your permission, you may be entitled to: 

• an injunction to stop the licensee or assignee from continuing to use your work; or
• seize the offending material from the licensee or assignee. 

Key Takeaways 

Your IP may be one of your business’ most commercially valuable assets. Therefore, you must create a strategy to capitalise on this. For example, consider whether you want to hand over ownership of your IP or whether you want to retain control and allow another entity to use your IP for a specific purpose. Either way, you should ensure the terms of your agreement are clear so that another party does not use your IP without your permission or in an inconsistent manner. 

If you need assistance in determining which option is best for you, our experienced intellectual property lawyers can assist as part of our LegalVision membership. You will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions