Part 3: Licensing your Intellectual Property

Intellectual Property (IP) is a vital business asset for a modern business. When you own copyright and register your trade mark you have valuable rights that you can use to monetise your IP and grow your business.

This article is part 3 of a 5-part series on how to protect and monetise your IP.  Part 1 looks at copyright. Part 2 discusses trademarks. Part 4 will explain how to assign your IP and Part 5 will focus on protecting your IP from ex-staff.

What is the difference between assigning and licensing?

When you assign your IP rights (including your copyright), you sell the rights to your work. You transfer ownership and you cannot use your work again. You cannot impose terms and conditions on use of the work. This is common when you are employed (or contracted) to create a specific work for another business.  See Part 4 in our series, for detailed information about assignment.

When you license IP, you retain ownership of the IP rights. You give permission to another business to use your IP and you set the terms. For example, you can license another business to develop the idea, to manufacture the product, and to market and sell the product or service.

Licensing advantages

There are advantages to licensing your IP compared to assigning it, including the following:

Control

If you license your IP, you set out the terms and conditions under which it can be used. You keep the ownership of the IP and you can license it to other parties.

Less initial cost

If you have a great idea, you could license it to a third party manufacturer to create the product. This could be considerably less expensive, and result in a higher quality product than if you were to manufacture it yourself. You need a well-drafted manufacturing contract to protect your intellectual property.

Greater expertise

When you license a third party, you benefit from their expertise. For example a third party manufacturer should have considerable expertise in how to actually make the product.  A third party seller may have expertise and contacts to help sell a product or service to a particular industry.

Incentives

When you license a third party, you can build in incentives to succeed. For example, a strong seller can have an exclusive territory, or discounted pricing from you.

Licensing types and conditions

There are a wide range of types of licenses, including:

• Exclusive or non-exclusive;
• Local, Australia wide or international; and
• Revocable or irrevocable.

What conditions can I impose?

You choose the license conditions, including:

• Payment;
• Territory restrictions;
• Sales volumes;
• Use of the IP and marketing materials;
• Record-keeping requirements and other obligations; and
• Rights or restrictions on sub-licensing.

Conclusion

It is important to understand what IP rights you have, so you can license these. You need to understand the different types of license. You must not inadvertently create a franchise, as there are additional requirements for a franchise under the Franchise Code.

An IP expert can assist you to understand what IP rights you have, decide whether you want to assign or license your IP and can help you understand the difference between a license and a franchise. It is important to have professional help to write an IP license agreement, so that you correctly define the IP, protect the IP, and correctly set out  the rights and conditions of the license.