3rd October 2011

Geldards LLP: Licensing Intellectual Property – Top Tips

 Licensing Intellectual Property: Top Tips

Before granting a licence of Intellectual Property (IP) there are a number of factors to consider including its objectives and limitations. With that in mind, here are our top tips to consider when granting a licence.

1. What will be licensed ?

Consider exactly what IP is to be licensed, and how and where it is currently protected. For example, if a patent is being licensed, what countries does the patent cover and does any know-how also need to be licensed ?

2. Who owns the IP ?

Check that the person or entity wishing to grant the licence is actually the owner.

3. The extent of the licence

Will the licence be exclusive (so only the licensee can use the IP), sole (both the licensor and licensee can use the IP) or non-exclusive (so the licensor can use the IP itself, but also grant further licences to other third parties) ? Bear in mind that the latter may be the most lucrative for the licensor, but may not be an appealing prospect for a licensee.

4. Scope and restrictions

Consider the scope of the licence. For example, is it to develop, manufacture and/or sell products ? In which countries and/or industry sectors will the licensee be permitted to operate ? Consider the competition law implications of any restrictions you want to include.

5. Sub-Licensing

Decide if the licensee can sub-license its rights. Under what circumstances can this happen and what are the implications for both parties?

6. Rights to improvements

Decide who will own any improvements made to the IP, if relevant, and who will own the rights to any such improvements.

7. Payments for the licence

Ensure it is clear what payments will be made in exchange for the licence and when these will be payable. Will royalty payments be due on sales, an annual fee for the licence or a combination of the two? Will there be a minimum royalty payment?

8. Technical Assistance

Will the licensee need any technical assistance to utilise the IP ? If so, decide who will pay for this and where and when it will be provided.

9. Infringements

Who will be responsible for any costs or rectification if the licence infringes the rights of a third party? Also decide who will take action and bear the cost if a third party infringes the licensed IP.

10. Warranties

Consider whether the licensor will offer any promises or assurances as part of the licence, for example, regarding chain of ownership.

11. Term and Termination

Consider how long the licence will last, how it can be terminated, for what reasons and by which party.

12. Competition Law considerations

It is advisable to speak to a lawyer about competition law considerations as including restrictions (eg on customers, territory or ownership of improvements) can cause problems and also as certain exemptions may apply.

13. General Considerations

Ensure all terms of the licence are clearly set out, preferably in a written agreement to avoid any later ambiguity or dispute. Select which laws and jurisdiction will govern the licence.

For more information contact Pippa Farmer, Associate – Commercial Services, Intellectual Property & Information Technology, Geldards LLP, philippa.farmer@geldards.co.uk, +44 (0)29 2023 8239