Intellectual property rights may be licensed to other parties. A license is a permission to do something that, without the license, would be an infringement of Intellectual Property. Taking a license to use someone else’s IP will be necessary if you want to use that IP without infringing their rights.
A license may be granted by a party ("licensor") to another party ("licensee") as an element of an agreement between those parties.
IP may be “licensed-out” or “licensed-in”. For example, you may “license-out” to another company or organization in return for a reward, financial or other “inkind” benefits or a combination of both. You may wish to “license-in” if you want to use another company’s IP to develop your own business and products.
Types of IP licenses:
1. Exclusive license: Only the person who is granted a license, the licensee, can use the IP. The licensor is not entitled to use the IP.
2. Sole license: Only the IP owner and licensee can use the IP.
3. Non-exclusive license: The IP owner may use and license to more than one
Benefits of licensing:
Sharing Risk: Where a licensor licenses the right to manufacture and sell products, the licensor receives revenues from that licensing but does not take the risk of manufacturing, promoting and selling those products. On the other hand, the licensee has the right to use the IP without the expense and risk of the research and the costs of developing the product.
Revenue Generation: An owner of IP may commercialize the IP itself and may obtain additional income by licensing the IP to someone else to commercialize it in a different field.
Increasing Market Penetration: An owner of IP may license another business to sell in territories that the owner cannot cover.
Reducing Costs: A business may ‘buy-in’ innovation to reduce its research and development costs.
Saving Time: A business may get its products or services to market more quickly by acquiring a license to use existing IP, instead of re-inventing the wheel (sometimes referred to as an “engineering workaround”).
Accessing Expertise: By taking a license, a business may tap into expertise that it does not have in-house.
Obtaining Competitive Advantage: By acquiring a license to use IP, a business may obtain an advantage over its competitors.
Collaboration: Businesses may want to work together to develop new products and services.