License defined
- A license is a permission—a party that has the right to prohibit something grants authorization to another who wants to do it.
Why license IP?
- Offensive Licensing
- Make your technology the industry standard: license to popularize the technology.
- Revenue generation: make some cash out of your hard earned developments.
- Quality Control: let your technology lead the industry.
- Make vs. buy decisions: it may be cheaper to acquire technology than it is to develop the technology from scratch.
- Defensive Licensing
- Cross Licensing: for example, competitors may cross-license as a way to avoid litigation.
- Competitors may cross-license to gain freedom to design.
- Complementary companies may cross-license to expand product lines or to develop strategic alliances.
- Use your IP as negotiation bargaining chip to gain access to IP that you want.
Types of IP Licenses
- Exclusive or/Non-Exclusive
- An exclusive license grants the licensee rights in the licensed IP, with a commitment from the owner not to license similar rights to others. A non-exclusive license allows the IP to be licensed to others (like the license to a mass-market software product)
- Because the licensee of an exclusive license has some protection against competitors, an exclusive license is similar in spirit to an assignment of the IP The agreement may specify any rights that the licensor chooses to retain, such as internal use or R&D rights.
- Rights in IP may be sub-divided and distributed according to selected characteristics, such as geography, duration, field of use (type of customer, type of product). A license almost always includes restrictions on the licensee’s use of the IP, such as field of use, geography, a designated customer segment, temporal scope, etc.
- Patents/Knowhow/Hybrid
- Patent licenses grant rights in a patent or application, but only for the life of the patent. Know-how licenses provide access to the expertise of a licensor, such as certain process trade secrets, so that the licensee may produce a product or service more easily.
- Hybrid licenses grant a combination of IP rights, such as know-how and patents, and so a hybrid license contains terms normally found in multiple types of licenses.
- Trademarks
- Trademark licenses grant rights in the use of a trademark, but the licensor must retain control over the quality of the goods and services bearing the trademark, or risk loss of the trademark.
Common types of provisions
- Duration: perpetual or limited.
- Exclusivity: any limitations on the rights grant? Fields of use? Territories? Types of customers?
- Royalties: Fixed payments via paid up royalties (lump sum) or periodic amounts based on schedules or milestones? Royalties based on units, net sales, gross revenue or net profit? Minimum royalties—minimum guaranteed payment, right to terminate, renewal period?
- Licensee obligations: Development milestones? Diligence/best efforts obligations? Reports? Audits?
- Sublicensing: May the licensee sublicense? Under what conditions? To have products made or distributed, or without limitation?
- Improvements: If the licensee develops improvements, does ownership automatically vest in the licensor, with a license back to the licensee? Does the licensor have rights to improvement innovations made by the licensee? Does the licensee have rights to improvements made by the licensor, perhaps as rights of first refusal to a license to the improvements?
- Confidentiality: Duration? Identify subject information!
- Termination: Is the license irrevocable or terminable? Under what conditions?
- Assignability/Transferability: May the licensee transfer rights? When? Under what conditions?
- Warranties, Indemnifications, Limitations of liabilities: “legalese” are important protections.
How do you license?
- Develop a strategy.
- Based on your business goals, build a corporate strategy; use IP as a tool.
- If licensing your IP is part of the strategy, decide what IP to keep exclusively, and what can be licensed.
- Identify potential licensees.
- Identify licensing terms:
- consistent with your business goals, and
- likely to be acceptable to potential licensees.
- If acquiring IP is part of the strategy:
- Decide what IP you need.
- Identify potential licensors.
- Identify licensing terms:
- consistent with your business goals, and
- likely to be acceptable to potential licensors.
- Use best business practices to implement the strategy.
- Approach prospects.
- Negotiate terms and execute agreement.
- Follow-through with obligations.
Types of Agreements
- Software/Technology Licenses
- Product/Service Development Agreements
- Sales Agreements
- Supply Agreements
- Consulting Agreements
- Consortia Agreements
- Massachusetts Association Of Technology Transfer Offices Joint Invention Administration Agreements (MATTO JIAAs)
- Cooperative Research and Development Agreements (CRADA)
- Technology Transfer Agreements
- Product Loan Agreements
- Field Test Agreements
- Non Disclosure Agreements (NDAs)
- Memoranda of Understanding (MOUs)
- Responses To Requests For Proposals (RFPs)