Did you know you can commercialise your intellectual property by licensing intellectual property rights?
Licensing intellectual property occurs where you give permission for another entity to use your intellectual property on agreed terms and conditions.
What are the most common forms of licences?
The three most common forms of licenses are:
- exclusive licenses – which is a licence that grants the licensee the right to commercialise the intellectual property to the exclusion of others, including the licensor;
- non-exclusive licenses – where the licensee is one of many who is given the right to commercialise the intellectual property; and
- sole licenses – which is a combination of both an exclusive and non-exclusive licence which allows both the licensee and licensor to use the intellectual property.
What limitations/conditions can be implemented in licenses?
Intellectual property owner can place a number of restrictions which limit a licence. Such restrictions include (without limitation):
- exploitation restrictions which restrict the licensee’s use of the intellectual property;
- field restrictions which restrict the licensee to a specific field of application;
- territory restrictions which restrict the licensee to a specific geographical area;
- time restrictions which provide an expiration date for the license.
Intellectual property owners often choose to limit the licence to achieve one of two objectives:
- to retain the residual rights to commercialise in-house; or
- to license the intellectual property rights to a number of different licensees, all being granted exclusive licences with complementing restrictions.
In addition to the above, intellectual property owners can also implement licence conditions which cover:
- accounts, inspection and audit;
- sub-licensing;
- assignment (transfer);
- performance targets and obligations; and
- confidential information.
What types of fees can intellectual property owners charge under a license?
Intellectual property owners get to decide the licence fee they impose on licensees in exchange for providing them the right to use and commercialise the intellectual property.
Licence fees can take the form of:
- royalties on sales (expressed as either a percentage of the product’s sale price);
- royalties for the use of a process; or
- lump-sum licence fees which take the form of either a signing fee, periodic payment or milestone payment.
Generally a lump-sum fee will recover the expenses of developing the intellectual property to a point where a licence is possible. These include research and development costs, administrative and indirect costs, along with a profit component.
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