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If you have an established business, you may want to take the next step to expand your business. However, how can you do so without forking out thousands to open a few more stores or offices across the country? You could consider accelerating your business growth by licensing your intellectual property (IP) to other parties. Your IP is an asset that you can use to enhance your business and generate revenue. IP can include copyright, trade marks, design registrations, patents, confidential information and even trade secrets.

What Is a Licence?

A licence agreement grants another person or business the right to use your IP. There are three types of licence. These are:

  • exclusive licences: these grant the licensee exclusive rights to use and commercialise your IP and also excludes you from using your own IP (depending on the terms of the licence);
  • sole licences: these allow both you and the licensee to use and commercialise your IP (unlike the exclusive licence, you have more autonomy to use your own IP with this licence); and
  • non-exclusive licence: these allow you to licence your IP to several parties so that you can continue to use your IP without limitations whilst generating further revenue.

Why Have a Non-Exclusive IP Licence Agreement?

There are many commercial benefits to licensing your IP to third parties. As a new business owner, you may not have the experience to develop and market your goods or services. You may also lack the resources to reach a large network. Licensing your IP may be an appropriate vehicle to make your move in the market.

By licensing your IP, you grant other parties the right to your IP. This may be the quickest way to expand your brand, whether via: 

  • marketing strategies; or 
  • simply allowing other retailers to stock your products within their stores. 

Whatever strategy you and the licensee agree to, you can continue trading whilst knowing others are helping you in your brand expansion plans. This means that you can meet business milestones quicker.

As the licensor, you still retain all the rights to your IP whilst making a profit (see below point about ‘royalties’). A non-exclusive licence, unlike the other types of licences, allows you to use your IP without any limitations. 

Other commercial benefits include:

  • expanding goodwill (i.e. your business reputation); and
  • the option to expand your business overseas.

What to Include in a Non-Exclusive Licence

Your non-exclusive licence agreement must be drafted carefully to ensure that:

  • your business has sufficiently protected its own IP rights, and
  • you reap the benefits of the services of the licensee in commercialising your IP.

The licence will clearly set out what IP you are allowing other parties to use. It will also outline the extent to which other parties can use your IP. In determining this scope, you should consider your business’ goals and commercial interests. Do you want to expand your business within a few states, or do you want to licence your IP Australia wide? Have you considered international growth? Non-exclusive licence agreements can be geographically limited, so you must consider your long term business objectives.

You should also consider the time period of the licence. Other points to consider when setting up a non-exclusive licence include:

  • the general limitations of your IP usage;
  • whether your licensee can engage third parties to assist in the commercialisation of your IP;
  • whether there are any specific conditions you want to impose on your licence; and
  • what the value of the licence is.

Am I Entitled to All of the Licensee’s Sales?

As the licensor, you will be eligible to receive a certain percentage of the licensee sales, depending on the sale price of the product. The cost of the royalties you receive is influenced by various factors, such as the:

  • industry your product or service is in; or 
  • state to which your IP is developed. 

For example, the royalties you receive from a licensee whilst your trade mark application is pending may differ from the royalties you receive once you have a registered trade mark.

You can also receive different royalty rates when you achieve commercialisation milestones.

For example, you can receive a milestone payment from the licensee once your trade mark enters an international market or for the first sale of your product in another State. 

Key Takeaways

Licensing your IP is a major step in your business’ commercialisation plans. IP license agreements can be complex and often involve a lot of work, so it is in your best interest to have a professional draft the agreement. If you need assistance with drafting an IP Licence Agreement, contact LegalVision’s IP lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is an IP licence?

A licence agreement grants another person or business the right to use your IP. Depending on the type of licence, you or others may still be able to use the IP you licence.

What is a non-exclusive IP licence?

A non-exclusive IP licence allows you to licence your IP to several parties, but continue to use your IP without limitations. This means you can continue to use your IP and generate further revenue.

What are the benefits of a non-exclusive licence?

Unlike the other types of licences, a non-exclusive licence allows you to continue using your IP without any limitations. They may also allow you to expand goodwill and expand your business overseas

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