What Are Licensing Agreements and Why Are They Important?
Licensing Agreements, particularly in the context of intellectual property, are written, legal contracts between two parties wherein the owner of the IP at issue gives permission to another party to use the IP. The agreement, between the licensor (the IP owner) and the licensee (the permitted party) should set forth the specific terms of the agreement between the parties, including the specific IP at issue, whether the license is exclusive or non-exclusive, terms of use, term of the agreement, what rights are retained by the licensor, and other key terms.
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Licensing agreements are useful in connection with all types of IP and the terms will vary accordingly. Such agreements allow IP owners to grant access to their IP—for compensation, known as royalties—while still controlling the terms of use and distribution of that IP. Licenses can also allow an IP owner to enter new markets without having to expend the capital. IP owners should use caution, however, as entering into a licensing agreement with the wrong party can nullify the usual benefits of such as arrangement and even lead to protracted conflict or even litigation.
Licensing agreements vary depending on the type of IP involved:
Patent Licenses – a patent license can be a means of allowing the patent owner to profit from a technology it invented when the owner does not have the resources to manufacture or distribute themselves. For example, drug companies often license their medical patents to companies who can distribute and sell the medication at scale.
Trademark Licenses – trademark licenses are also helpful when one owns a brand (or logo) that is gaining traction or ready to emerge into the market but lacks the financial resources to handle manufacturing and distribution. It can also be a way to monetize a famous or very popular brand, allowing the on-trend brand to be used on merchandising or other mass-marketed products, such as on clothing, sports accessories, home goods, and other goods.
Copyright Licenses – Copyright licensing comes into play often with public performances of plays and music or public displays of movies, books, art, or even popular characters (such as merchandising related to popular animated characters). These licenses are also common in the software industry, allowing the software owner to receive proper compensation for all end-users, maintain control over distribution, and ensure the software is used ethically.
Trade Secret License – unlike other forms of IP, trade secrets cannot be registered for legal protection. Rather, such protections arise out of what steps are taken to protect the confidentiality of trade secret information. Trade secret licenses are used to ensure that employees have access to information necessary to perform their job duties, while also delineating parameters related to disclosures (or ensuring non-disclosure) so that there is some legal process for protecting the information if the written license is breached.
Klemchuk PLLC is a leading IP law firm based in Dallas, Texas, focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. Our experienced attorneys assist clients in safeguarding innovation and expanding market share through strategic investments in intellectual property.
This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
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