What A Licensing Agreement Is
A patent secures your rights in the invention - allowing you to safely speak with other individuals who may be interested in manufacturing, distributing or marketing your invention. When you find such a company that is interested in your invention, you would ordinarily make an agreement in which they pay you to make your product.
An agreement with a company to produce your patented product, and pay you a royalty in return, is called a "licensing agreement". Licensing agreements must be carefully negotiated and worded to ensure that the inventor's rights are protected. A licensing agreement is a partnership between an intellectual property rights owner (licensor) and another who is authorized to use such rights (licensee) in exchange for an agreed payment (fee or royalty). A variety of such licensing agreements are available, which may be broadly categorized as follows:
• Technology License Agreement
• Trademark Licensing and Franchising Agreement
• Copyright License Agreement
Our China IP licensing lawyer works with clients to help them maximize the benefits of a successful invention. Our attorney has many years of experience helping clients get the patents, trademarks and licensing agreements they need to protect and profit from their ideas.
Why Should You Have a Licensing Agreement?
The purpose of a licensing agreement is to make money by selling the right to manufacture and sell your invention in exchange for royalties. Having a licensing agreement is one method of getting paid for your invention. As a result, this critical step must be taken carefully.
There are many traps you can fall into with licensing agreements. Only an experienced attorney with extensive knowledge of licensing agreements, patents and trademarks can help ensure you are getting the benefit of the agreement you are entering, especially when you are dealing with companies who have much greater experience and resources.
What Do You Include in a Licensing Agreement?
There is no magic to giving someone a license for property use. In business, a written license agreement is a must. However, the agreement doesn't have to be long or complicated. It can be straightforward and enforceable.
Drafting a license agreement doesn't mean starting from scratch. Although you shouldn't copy them, you can look at existing agreements for ideas, such as the licenses for programs on your computer.
License Agreement Scope
First you need to set the license's scope. Licensing is assigning limited use rights for property. Be sure you keep ultimate ownership rights. However, rights need to be broad enough so customers want to use your product. Except for custom-made products, a license is typically be nonexclusive, so you could sell it to others.
However, it doesn't have to allow the licensee to reproduce or pirate the product and sell it in turn to third parties. Sometimes, licenses allow reproduction within a controlled environment such as with enterprise licenses or network licenses. In other cases, a licensor may allow for a resale license, with royalties paid to the licensor.
Revenue from Your Product
Terms controlling revenue streams generated by licensed products are key. With most license agreements on end user consumer software, for example, a one-time license fee is usually paid at purchase. Other arrangements may include recurring payments such as royalties or monthly lease payments. License agreements may also cover ongoing maintenance charges.
Other license agreement topics to cover include:
• Term (agreement length)
• Rights to modify and combine with other products, if any
• Prohibited uses
• Transfer and sublicense rights
• Rights to source code
• Acceptance, testing and training procedures
• Limitations on the licensor's liability
• Support services
• Nondisclosure of confidential information
• Indemnity for infringement
• Enforcement of remedies
• Contract termination
In the international context, a formal licensing agreement is possible only if the intellectual property right you wish to license is also protected in the other country or countries of interest to you. If your intellectual property is not protected in such other country or countries then you would not only not be able to license it, but also you would have no legal right to put any restriction on its use by anyone else. Contact our Guangzhou intellectual property lawyer for more information.