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If you have invested significant time and money into developing a brand, an invention or a creative piece of work, you may be wondering how you can make money from your intellectual property (IP). If you want to allow others to use your IP, but you do not want to give them complete ownership, a licensing arrangement can be a good option. This agreement should be part of an IP licence agreement. There are key clauses you should include when you draft your intellectual property licence agreement to ensure you:

  • protect your IP; and
  • get the most value from it as possible.

What Is an Intellectual Property Licence Agreement?

An Intellectual Property Licence Agreement is a document that outlines how you, the creator of the IP and licensor, are allowing another person, the licensee, to use your IP. Both you and the licensee need to agree to the terms and conditions of use. It is best practice to document this agreement in writing, in the form of an intellectual property licence agreement, so that it is very clear:

  • who the owner of the IP is; 
  • how the licensee is permitted to use your IP; and
  • whether there are any restrictions or conditions on the use. 

Licensing your IP can leverage its value, by increasing brand awareness and developing your reputation, without you having to increase your market presence on your own. You may also include terms in your agreement that stipulate any royalties you will receive from the licensee’s use of your IP. You may just want to use your IP to its maximum potential. 

It is always best to have an intellectual property lawyer draft, or at least review, the terms of any intellectual property licence agreement. 

Key Clauses

The sections below set out:

  • the key clauses to include in your intellectual property licence agreement; and
  • what these clauses should contain.

Parties

You should set out the details of the parties to the agreement. These are the:

  • licensor (who owns the intellectual property); and 
  • licensee (who will use the intellectual property). 

If you are licensing your IP as a sole trader or through your business, make sure to include your Australian Business Number (ABN). Similarly, if the licensee has an ABN, include this too. You should also include the full contact details of you and the licensee, including postal address and email addresses, so that either of you can notify each other of any issues. Contact details are also essential so that you can locate the licensee if they do not make payment according to the terms of your agreement. 

Recitals

The recitals section provides the background information to the agreement and sets out why you are licencing your IP (e.g the purpose or the project). It should set out that:

  • you are the owner of the IP rights in the IP you are licencing; and
  • the licensee has requested your permission to use the IP for a purpose which you have both agreed upon. 

You do not need to include the full details of the IP you are licencing here. In the recitals, you can also include information about how your IP was developed or registered, if relevant. For example, you can include whether you:

  • developed it to enable you to operate your business;
  • registered a patent to protect a unique product; or
  • whether you registered a trade mark to protect your brand.

Fees and Purpose

You should then include whether there are fees associated with the licence and, if so, you should state that you are agreeing to grant the licence for the non-commercial or commercial use (whichever is applicable) of the IP on the terms and conditions set out in the agreement. For example, you may agree that: 

  • the licencee will pay you a fixed sum of money per month for use of your IP; or 
  • you will receive royalties or a commission in exchange for the use of your IP. 

Setting out all of these terms and conditions in an intellectual property licence agreement ensures that the licence is only used for the purpose that you want it to be used for, so that you retain control. 

Schedule

The schedule to your intellectual property licence agreement sits at the back of the agreement, and will include the details of the exact IP that you are licencing. You should include details about this IP such as:

  • patent or trade mark registration details;
  • documents or templates; or
  • images and image details.

Having a schedule also assists you in a practical sense, as you can update the details for each individual licence without having to redraft the entire agreement. The schedule is also useful for including other terms, such as:

  • geographical or time limitations on the use of your IP (for example, the state or territory in which the license can be used); 
  • payment method and frequency; 
  • invoice terms; and
  • notice period to terminate the agreement. 

Key Takeaways

Before you allow others to use your IP, you should draft an intellectual property licence agreement. As the owner and licensor of your IP, having this type of agreement in place gives you confidence and certainty that: 

  • your IP will only be used in the ways you prescribe; and 
  • others cannot take advantage of your hard work in developing your IP. 

If you need to draft an intellectual property licence agreement, contact LegalVision’s intellectual property lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is intellectual property?

Intellectual property refers to your business’ creative assets. For example, this includes your branding, logo, trade secrets and slogan. 

Who is the licensor and who is the licensee in an intellectual property licence agreement? 

In an intellectual property licence agreement, the licensor is the party who owns the intellectual property and the licensee is the person who licences it to use in some way.

How do I get paid when I licence my IP?

When you licence your IP, the intellectual property licence agreement should set out how you will be paid. For example, you could receive a fixed payment each month or you could receive royalties.

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