Why You Need a License Agreement for Your Intellectual Property

A company’s intellectual property, from its logo to its slogan, right down to the systems it developed for internal sales, is critical to its success. What would McDonalds be without those golden arches? Or the Colonel without his bucket of Crispy Fried Chicken?

It is common commercial practice for one business to permit another to use its intellectual property in return for a fee or a reward. Consider Coke allowing its branding to be placed on memorabilia. And franchisors permitting their franchisees to use their intellectual property – this is an essential element of the franchise relationship. And the owners of the rights to Dora the Explorer have undoubtedly made a very pretty penny licensing the use of the intellectual property associated with the Dora brand to third parties.

When you are purporting to license out your IP, or you are seeking the use of another company’s intellectual property for your own commercial advantage, it is invaluable to have a formal license agreement drawn up.

What is the Relevant Law?

There are several pieces of legislation governing the ownership and use of intellectual property. These include the Copyright Act 1968 and the Trade Marks Act 1995, as regulated by Intellectual Property Australia. Also, the right of use as governed by a license agreement is subject to the general contract law.

What is a License Agreement?

A License Agreement is, in essence, an agreement whereby one party, the Licensor, grants to another, the Licensee, the right to use or exploit something. Importantly, a license does not transfer ownership, just the right of use. In the case of intellectual property, the copyright and/or ownership of the trademarks and patents remains the property of the Licensor. For example, a Domino’s franchise licenses its intellectual property to its franchisees. The franchisee is really purchasing the right to trade under an established brand name and to use its patents, designs, trademarks, logos, promotional material and shop fit outs.

What Will it Cover?

A license agreement for IP will cover, among other things:

• the right and method of use,
• limitations on that use,
• the extent to which the licensee can manipulate or alter the intellectual property,
• the fees payable by the licensee, and
• method of payment and what happens when the license agreement concludes.

How Do I Get One?

An experienced commercial lawyer should draft a license agreement for intellectual property. Although such agreements do not have to be especially costly, their importance cannot be understated.

Conclusion

Your intellectual property is undeniably valuable to your business, and allowing a third party to use that intellectual property should be the subject of a carefully drafted agreement. You should seek to engage a commercial lawyer with experience in intellectual property and licensing.

Should you have any questions, or require any assistance reviewing or drafting an intellectual property licensing agreement, please get in touch! LegalVision’s lawyers would be delighted to help you take steps to protect your business.