A licence lets someone use intellectual property without transferring ownership of it. Done well, a licence turns an asset into a recurring revenue stream while keeping control of the right. Done poorly, it gives away more than intended or becomes impossible to enforce. The terms below are the ones that decide which outcome you get.
Scope defines exactly what the licensee may do. The key dimensions are field of use (which products or markets), territory (where), exclusivity (exclusive, sole or non-exclusive) and whether sublicensing is allowed. A narrow, well-defined scope lets you license the same right to different partners in different fields without conflict. A vague scope is the most common source of licensing disputes.
Common royalty models include a percentage of net sales, a fixed fee per unit, or a flat periodic fee. Minimum royalties protect the licensor where an exclusive licensee underperforms, and audit rights let the licensor verify the figures the royalty is based on. Defining the royalty base precisely, especially what counts as net sales, matters as much as the rate.
If the licensee improves the licensed technology, who owns the improvement? A grant-back gives the licensor rights to use improvements the licensee makes. Ownership of derivatives should be settled at the outset, because it is contentious and expensive to resolve later.
For trademark licences, quality control is not optional. A trademark owner who licenses the mark without controlling the quality of the goods or services sold under it risks the mark becoming vulnerable. The licence must set quality standards and give the owner the right to inspect and enforce them. This is why trademark licensing is treated as its own discipline in our trademark licensing service.
Set the term, the grounds for termination, and what survives termination, such as confidentiality and the obligation to stop using the right. A licence with no clean exit is a liability for both sides.
Licensing sits in the Commercialize stage and spans several of our services: trademark licensing, patent and technology licensing, and data licensing and data sharing, all part of the wider commercial contracts and transactions picture. For background, see how to structure a licensing programme and transferring or licensing a trademark. Drafting runs through our Contract Studio and Clause Library and Risk Review technology.
An exclusive licence excludes everyone else including the licensor from using the right in the defined scope. A sole licence lets the licensor continue to use it but no other licensees. Non-exclusive allows multiple licensees in parallel.
A licence keeps ownership and grants use; an assignment transfers ownership outright. If you want to retain the asset and earn from it over time, licence. If you are selling the right permanently, assign.
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