What is an Intellectual Property License?
Justin Wilson – Trainee Solicitor
It may be the case that you are the owner of certain Intellectual Property (IP) and others are interested in using them. If this is the case as the IP owner, you may be able to receive income from allowing others to use your respective IP, through a Licence.
Before you agree to enter into any IP licence, you must ensure that you are the owner of the IP. Trademarks are straightforward as most will be registered and you can easily see who the owner is by searching on the trademark register. Unlike trademarks, with other IP such as copyright you will need to be certain that you are the owner, as it can be unclear. If you are uncertain whether you are the owner then you should seek advice from a solicitor or an IP specialist, who will be able to confirm whether you have ownership rights over the IP.
What is in an IP Licence?
Scope of the Licence: The question you need to ask as the Licensor is “what rights am I going to allow the Licensee to have?” The licence should spell out what goods/services in relation to the IP are to be used. It is usual for marketing and promotion of the IP to be covered in the licence also.
Non-exclusive or Exclusive Licence: As the Licensor, it is common to enter into a non-exclusive licence as this permits you to grant the Licensee the right to use the IP whilst also allowing you the ability to negotiate further licences with other parties in relation to that IP. An exclusive licence will restrict the Licensor to enter into a licence with only one licensee in relation to rights of the IP.
Territory: The territory where the licence can be used and where the IP is protected needs to be clearly defined in the licence, otherwise potential infringement claims could arise.
Agreeing to Sub-License: As the Licensor you will want to restrict this as much as possible, as you do not want your IP entering into the wrong hands, and therefore you may want this right to be removed completely. However, if you do agree to sub-licensing, then ensure that the licence is drafted in a way to ensure that the Licence may not be sub-licensed without your prior consent.
Royalties: As the Licensor you will want to maximise the amount you can earn from Licencing your IP. One way of doing this is by adding a “minimum royalties” provision in the Licence. This means that regardless of the actual revenues made in relation to the use of the IP, the Licensee has to pay the minimum amount specified in the licence. Please note that the Licensee may not agree to this if they were concerned about the income they could generate but it is worth trying to incorporate into the Licence. Equally once the minimum is reached you would want the royalties to be a proportion of the income received by the Licencee. Additionally a provision where a lump sum is paid on the date the Licence is completed by way of an advance can be added. All of these terms will need to be negotiated between the Licensor and Licensee.
Infringement: it is common for a clause to be drafted to ensure that the Licensee informs the Licensor of any infringement or possible infringement of the Licensor’s IP. You will want this provision to make it clear what party is to take action against the said infringement. However, with certain IP i.e. trademarks there is statute that states who is to take on infringement proceedings. Section 30(2) Trademarks Act 1994 may call the Trademark owner to take on the infringement proceedings, if the licence entered into is an exclusive one.
As Licensor, you will want a clause in the Licence that gives you control over any infringement claims against third parties and for the Licensee to give full details of the said infringement or potential infringement.
Jurisdiction: if you are negotiating with someone or a company who is governed by a different jurisdiction, you will need to check that, one your IP is protected in that jurisdiction. For example, for a trademark, is the trademark UK only, or an EU trademark? For copyright, does the Berne Convention apply? Secondly if you want the Licence to be governed by a certain jurisdiction you will need to ensure that the party based in the other country agrees for the Licence to be governed by the jurisdiction you propose.
The above are key sections that are commonly covered in an IP licence and advice should be sought when entering into any licence of this kind. If you or your company are the owner of any IP and you need a licence of this kind being drafted, we can guide you through what you need to do and what needs to be included to ensure you are protected as much as possible.