Licensing and selling intellectual property
Affected by Brexit?
If you own intellectual property (IP) you could grant rights of use to another legal person (An individual, company, or other entity which has legal rights and is subject to obligations), known as "licensing your IP". You may also wish to generate revenue by selling it, this is better known as "assigning" or "transferring" your IP.
Before negotiating a licensing or an assignment agreement
In certain cases, it may be useful to keep some information confidential, such as:
- the piece of IP concerned - for example, technology for which no patent application has been filed so far or another trade secret
- the licensing or the assignment agreement itself, especially its financial aspects
For this purpose, you should conclude a non-disclosure agreement (Written agreement establishing that the recipient of the information cannot disclose it to third parties) with the potential licensee or assignee.
You can also gather and assess information about your IP by submitting it to an IP due diligence investigation; a thorough examination of all aspects concerning your IP.
Licensing out of your IP
As a holder of intellectual property, you can negotiate a licensing agreement with another entity (licensee) that gives permission for it to use your intellectual property. You may have a single licensee (‘exclusive licence') or several licensees. If offering multiple licences, these can be open or limited in scope to particular industries or geographical areas (such as franchising).
In exchange, you (the licensor) get paid for giving permission, typically in the form of "royalties" defined as a percentage of the sales. You can also set the limits for the use of the IP (geographical scope, field of use, etc.).
In this case, you as licensor:
- keep your right over the IP, which means that there is no transfer of ownership
- remain responsible for the maintenance (and, the case being, prosecution) of the IP rights concerned
Although licensing agreements need to be prepared with the assistance of lawyers and IP professionals, there are some key IP clauses to be negotiated and included before signing the agreement.
How do you establish a licensing agreement?
To establish a licensing agreement you should at least:
- put the agreement in writing
- clarify which IP rights exactly are concerned
- communicate the starting date, duration, and termination of the contract
- negotiate and mention in the agreement the financial compensation to be paid by the licensee to the licensor (e.g. possible lump sum, royalties, etc.)
- state the exclusivity or non-exclusivity of the license agreement
- mention all the conditions for the use of your IP
- define in which territories the licensee can use your IP
In some EU countries, you must register the licence agreement, usually at the national IP office.
Assignments: Selling your patents, trademarks and other IP
You can transfer the ownership of your intellectual property rights (patent, trade mark, copyright, etc.) by assigning/transferring your IP. With an IP assignment, you transfer all rights you initially possessed for the piece of intellectual property concerned.
When the IP assignment is finalised, you will have no further responsibility for that IP (such as paying renewal fees), nor will you benefit from any possible commercial success of the product or service concerned.
In addition, unless this is explicitly allowed in the assignment contract, you will not be able to further use the IP concerned (invention, trade mark, etc.), as long as it is protected.
How do you settle an IP assignment?
- Draft a written assignment, which you and the assignee must sign.
- Clearly specify and identify the IP that you want to transfer, for example indicating the registration number (if it is a registered IP).
- Negotiate and mention in the agreement the financial compensation to be paid by the assignee to you.
- Discuss possible warranties for specific details and include them in the agreement.
- Specify which law should be used to interpret the contract (for example, the law of your EU country) and the jurisdiction for any possible dispute settlement, whether an arbitration panel or a local court.
- Make sure you register the assignment at the relevant IP office if it is a legal requirement.