Your company’s intellectual property may have value beyond the products or services you currently sell or otherwise offer. A trademark, copyrighted work, patented invention, proprietary technology or other protected asset could potentially generate revenue through licensing.
A license agreement generally allows another party to use specified intellectual property without transferring ownership. An agreement should clearly identify what is being licensed and establish the scope of permitted use. Ambiguous language can create disagreements about rights that both parties assumed were understood.
Crafting a solid agreement
Exclusivity can be a major concern when drafting a licensing agreement. An exclusive license can provide one licensee with substantial rights, potentially preventing the owner from granting similar rights to others within the agreed scope. A nonexclusive arrangement may allow the company to license the same property to multiple parties. Geographic territories, industries, products and distribution channels can further limit a license.
Licensing arrangements might involve an upfront payment, ongoing royalties, minimum guaranteed payments or a combination of methods. If royalties depend on sales, the agreement should explain how they are calculated, when reports and payments are due and whether the intellectual property owner has appropriate audit rights.
Before negotiating a license, companies should confirm that they actually own the relevant rights and understand any existing restrictions. Licensing can transform intellectual property into an additional source of revenue, but a poorly structured agreement may create unnecessary risks. A skilled business law attorney can help identify ownership concerns, negotiate appropriate protections and draft licensing terms that can support your company’s commercial objectives while safeguarding its valuable intellectual property.