Licensing and franchising are behind a lot of business success and provide a potential route to growth. However, behind any successful licensing or franchising programme, there is always a well-drafted agreement.
LOVEN have years of experience in all aspects of licensing of intellectual property rights, from preliminary negotiation through to drafting the terms of clear, effective and workable licence agreements. If you would like to know how LOVEN can help to grow your business, please get in touch.
What is a licence agreement?
A licence agreement is a legal contract whereby a licensor gives permission to a licensee to use and exploit their IP, usually in return for the payment of royalties.
There are three types of licences:
- Non-exclusive licence: this type of licence can be granted to an unlimited number of licensees.
- Exclusive licence: this type of licence grants a single licensee the exclusive right to use and exploit the IP.
- Sole licence: this type of licence is often confused with an exclusive licence, but the critical difference is that a sole licence enables the IP owner to use and exploit the IP, as well as one licensee.
Terms of a licence agreement:
Before entering into a licence agreement, you and the other party must enter into negotiations as to what terms and conditions the licence will contain. These terms are then drafted into clauses of the agreement. Here are some of the issues that you may need to consider when entering into a licensing arrangement:
- Type of licence being granted – sole, exclusive or non-exclusive.
- Sub-licences – can the licensee grant sub-licences to others? Can the licence be assigned to a third party?
- Use restrictions – is the licence restricted to a particular field of use, purpose or distribution channel?
- Quality controls – what standards must be met by the licensee?
- Geographical area – is the licence restricted to a particular country?
- Duration – how long you wish the licence to last for, bearing in mind the duration of protection of the IP concerned.
- Termination – under what circumstances will the licence be terminated, for example, perhaps if the licensee breaches any conditions? Will the licensee retain any rights or will any obligations remain after termination?
- Governing law – if any disputes arise relating to the licence, it should be determined which country’s laws the licence is governed by, particularly where the parties are based within different legal jurisdictions.
- Payments – you need to carefully consider what amount and how fees will be payable e.g. will fees be based on use or number of items manufactured/sold (royalties) or by way of fixed periodic payments? Will there be minimum fees? Will there be penalty fees for terminating the licence early?
A confidentiality agreement (often also referred to as a ‘non-disclosure agreement’ or ‘NDA’) is a legally binding written agreement whereby both parties agree that any technical or commercial information shared is strictly confidential, and cannot be used for any purpose, without the written permission of the disclosing party.
If you are an inventor and you wish to pitch your idea to a potential manufacturer or business partner, then it is critically important to consider the implications of confidentiality.
Warning: Disclosure of your invention before you apply for patent protection could make your patent invalid!
Trade secrets are another important type of IP asset that can be better protected by a having a well-drafted confidentiality agreement in place. If you are thinking of sharing your ideas and want to know how you can protect yourself, please get in touch with us, before you give your secrets away.
Licensing can be a very complex area – please contact us for professional advice if you are considering entering into a licensing arrangement.
Need to transfer your ownership of an IP to someone else?
We can assist you with the transfer of your rights or the acquisition of third party rights by drafting assignments and handling negotiations with third parties.