Sometimes a very good idea could remain just that – an idea. Without a means of bringing your idea to public attention, it might remain marginal no matter its brilliance. Of course, you could use an Intellectual Property (IP) Licence Agreement. These agreements are the law’s way of helping the next big thing to become the next big thing. So if you have a fantastic idea and are considering whether you should use an IP Licence Agreement, this article discusses those things you ought to consider.

What is an Intellectual Property Licence Agreement?

At law, a licence is a permit that enables someone to do something that would be unlawful save for the licence. In the world of intellectual property, a licence agreement gives a person or business a right to use material subject to copyright in a manner that would otherwise infringe the rights of the owner of that material. The person who grants the permission to do this is the licensor; a licensee is an entity who receives the licence. Like most agreements, they are formed for commercial purposes.

A licence agreement may be exclusive or non-exclusive. If it is exclusive, it must be in writing.  Licence agreements also bind successors in title.

When is an IP Licence Agreement suitable?

The answer to the question of whether you should enter an IP Licence agreement is partly legal, partly economic and partly emotional. There are no hard and fast rules. Ultimately, it is a personal decision on the part of the owner of the intellectual property. Nevertheless, you must take some things into consideration when making a decision whether or not to enter into an agreement.

Broadly speaking, these include:

  • Whether you wish to retain ultimate ownership of the intellectual property;
  • Whether you can adequately exploit your idea commercially; and
  • Whether you have the knowledge and commercial ‘know-how’ to profit from your intellectual property.

If you create or invent something, you are usually attached to it emotionally to a greater or lesser degree. It took up your time, sweat and tears after all. In that context, you might be unwilling to relinquish full ownership of the property. If that is the case, a licence agreement enables a business or person to use and exploit your intellectual property without you ever giving up ownership of it. When the desire to retain ownership accompanies a lack of expertise and economic capacity, it makes a persuasive argument for entering into a licence agreement.

If you cannot utilise your property for lack of financial resources, a licence agreement is an excellent way of enabling your idea to reach the world regardless. You could still realise its full economic value. However, your licensee would profit from it as well.  Despite this, a properly drafted agreement would enable both of you to benefit and ensure that the intellectual property reaches its maximum financial potential.

Similarly, if you have little to no expertise in the area of exploiting intellectual property, a license agreement would still enable you to profit from your intellectual property. Further, to profit from it as much as possible. While it would cost you some profit, if you cannot exploit the property otherwise you are arguably still in a better financial position.

These factors should help you to decide whether to enter into an IP licence agreement. Of course, they are not exhaustive. Nonetheless, they provide a good way of thinking about the benefits and drawbacks of such an agreement.

Necessity of Expert Advice

However, your decision whether to enter into an agreement also rests on you accessing expert legal guidance in the area of intellectual property.  You will need this advice when the agreement is negotiated and drafted. While it might be tempting to think you can get a handle on the legalities and implications of the agreement by yourself, you would be doing yourself a huge disservice. While it will cost money, it will never cost the same as the amount you will lose without advice.

Intellectual property licence agreements are complicated. Without knowledge and information, you will not know what to look out for and what to request in the agreement. And it is axiomatic that a licensee is looking for maximum value at minimum cost. That stands in direct opposition to your interests as licensor. That means you must never make a licence agreement without sound and thorough legal advice. If you need assistance with drafting an IP Licence Agreement, contact LegalVision’s IP lawyers to assist you. Questions? Call us on 1300 544 755.

Carole Hemingway

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