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Have you invented or created something that you want to publicise and commercialise? After investing your time, money and expertise, it's not surprising that you want to ensure that your intellectual property (IP) remains protected from infringement and exploitation. However, you also need other businesses to bring your ideas and works to market or to provide a source of revenue for your business.
That's where a Licensing agreement (IP) comes into play. This guide will cover the basics of a licensing agreement and how you can get one started for your business.
What is a Licensing agreement (IP)
A Licensing Agreement (IP) is a legal document where the licensor (Company A) grants permission to the licensee (Company B) the exclusive or non-exclusive use of its intellectual property. In return the licensee pays the licensor a royalty or fee.
The agreement also outlines the licensor's terms for how the intellectual property can be used.
Licence agreements (IP) are commonly used by businesses, inventors, artists, writers, designers and others, for things like patents, logos, products and copyrighted works.
Download this template at Lawpath
When should I use a Licensing agreement (IP)
There are a few factors that come into play when you're deciding whether to use a licensing agreement (IP). These include legal, financial and personal factors. Some of the key considerations when deciding whether you wish to enter into an agreement include whether you:
- Want to maintain overarching ownership of the intellectual property
- Are looking to commercialise your IP rights
- Have the expertise to commercialise your intellectual property.
A licensing agreement gives you ownership and control over your intellectual property and protects your works from being infringed upon or exploited by other people.
In some cases, you may want to commercialise your IP but don't have the financial means or expertise. A license agreement can monetise your ideas or works on a greater scale. For example, a celebrity may enter into a non-exclusive licence agreement with a game developer for the use of his or her trademarks and copyright images.
In other cases, licensing agreements may be a core component of your business model and revenue. For example, a software developer may set up license agreements with their clients for the use of their proprietary software.
Licensing agreements (IP) vs Assignment Agreements (IP)
A licensing agreement is used when the licensor is granting permission for someone else to use the IP, but ultimately wants to retain the full rights to their property.
On the other hand, in an assignment agreement (IP) the creator gives away, or 'assigns', all of their rights to their work and ongoing royalties.
What does a Licensing agreement (IP) include and not include?
Here is what is included and not included in a standard licensing agreement (IP):
- Names of the Licensor and Licensee. This needs to include a statement that the licensor is the owner of the intellectual property rights in the agreement.
- Details of the IP and the IP rights being licenced. You should also include the purpose or project for which it is being licensed.
- Type and duration of the licence. Is it an exclusive, non-exclusive or sole licence? How long is the license valid for?
- Licence costs. This should include royalties, stamp duty and GST that will need to be paid by the licensee.
- Termination. The expiration and revocation clause of the licence.
- Warranties and indemnities. This includes some form of confidentiality or non-disclosure statement to prevent others from disclosing private and sensitive information about you and your works to others without permission.
- Attachments or files of the IP. This includes patents, trademarks, copyright images or logos etc.
- Terms of Service or Terms of Conditions. This is a contract established between a company and a user that sets out the rules the user must abide by in order to use the service.
How effective is a Licensing agreement (IP)?
Whether it is a trade secret, copyright or patent, your IP is the backbone of your business and it is important that you are able to protect and harness its economic value.
A licence agreement that is well-drafted is critical to the effective protection and commercialisation of your intellectual property. Not only does it provide the licensor the chance to terminate the agreement if royalties are not made, but also spares the hassle for both parties to go to court. On the upside, an agreement also provides financial benefits to both parties if successfully commercialised.
Do I need a lawyer for a Licensing agreement (IP)?
While there are free licence agreement templates you can use, we recommend that you contact an IP lawyer to help you draft and review your agreement. An IP lawyer can assist you in a number of ways right from the start, including:
- Determining the value of your IP
- Clarifying your rights
- Protecting your intellectual property from infringement through ongoing management and advice
Get access to customisable licensing agreement (IP) templates online
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How do I write a Licensing agreement (IP)?
It is best to consult with an IP lawyer who can help you draft the agreement. As above, a licensing agreement (IP) includes the key sections below:
- Name of Licensor and Licensee
- Background information on the agreement
- Details of the IP being licensed and how it can be used
- Fees and costs associated with the licence
Where to get free legal documents and templates like a Licensing agreement (IP
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