Are you considering giving someone a licence to allow them to use your intellectual property (IP)? Many businesses will licence out their IP as a way to commercialise their IP. There are three key types of licences: Exclusive licence, Sole licence and Non-exclusive licence. Deciding on the appropriate licence will depend on the purposes of your licensing and the extent to which you would like to be involved. Below, we look at the differences between the three types of licences and the key things you should keep in mind when deciding which licence to use.

1. Exclusive Licence

According to IP Australia, an exclusive licence is the most common type of licence. This licence gives the licensee the right to use and commercialise the licensor’s IP to the exclusion of all others. Most importantly, this exclusion includes the licensor.
The benefit of an exclusive licence is that it allows a licensee to commercialise your IP for you. Additionally, you will receive a significant fixed sum for the IP from the licensee.
Note that exclusive licenses can be limited to a particular territory, industry or period. The original IP holder may then retain the right to exploit the IP in other territories, industries or once the period has expired. If you are a licensor and you would still like to continue using the IP, the licence will need to state that it is exclusive subject to certain conditions.

2. Non-Exclusive Licence

A non-exclusive licence gives the licensee the right to use the IP. However, the licensor is also free to exploit the IP at the same time and allow others to do so. This is also a relatively common licence as it allows the licensor to give out a licence to an unlimited number of licensees.

The benefit of this licence is that it still allows the licensor to use the IP and may increase the commercialisation of the IP even if more licensees are allowed to use and exploit it. However, some licensees may be reluctant to buy a non-exclusive licence as they will hope for an exclusive one.

3. Sole Licences

This is like a crossover between an exclusive and non-exclusive licence. Like an exclusive licence, it does not allow other licensees to use the IP. However, it still permits the licensor to continue using their IP. The key benefit is that you as the licensor will still be able to use the IP and have more control than in the case of an exclusive licence.

What should I keep in mind?

In considering which licence best suits you, you should ask yourself: why are you licensing out your IP? Are you looking to commercialise? Are you licensing because you don’t have the resources to market your product yourself? How involved do you want to be? This will determine the most appropriate licence for you. If you are looking for minimal involvement and would like your product or service developed on the side, then the exclusive licence is the most appropriate. If you want to actively grow your business, then a non-exclusive licence may suit you more.

Key Takeaways

A licence is essentially a contract. Hence, a breach of contract rules also apply. Deciding to licence out your IP is a serious decision and should be thought through fully before any action is taken. If you have any questions about licensing out your IP, get in touch with one of our IP lawyers at LegalVision.

Lachlan McKnight
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