How to Decide Between Types of Licensing Agreements

Confused between different types of agreement? Not sure which licensing agreement is the one you need?
Here is the list of agreements to help you decide!

DECIDE WHICH IP YOU NEED TO LICENSE

1. Patent Licensing

The agreements in which a patent owner permits someone else to use their patent. The patent owners license their patents in order to make them easily produced and distributed. A patent license is a performance-based agreement that is very specific to meeting milestone benchmarks and deadlines, such as development of IP and payments of royalties.

2. Trademark Licensing

Trademarks, including brand names or slogans, are signifiers of commercial origin. Trademark license arrangements allow trademark owners to allow their IP to be used by others. Trademark owners license their trademarks for commercial goods, such as apparel, iPhone cases, or food products

3. Copyright Licensing

Copyrights exist in works of visual art, like paintings, movies, or songs. Copyrights also exist in characters, like Mickey Mouse. Copyright licensing agreements are often used for consumer goods, just like trademark licenses. They are also used for distributorships, such as with musical works or movies.

4. Trade Secret Licensing

Trade secrets encompass a broad variety of IPs, from formulas, know-how, software, business systems, production processes, and all data forms, such as seller, competitor, and customer information. The formulas for Coca-Cola and the recipe for KFC chicken are two of the most popular examples of trade secrets. Non-disclosure agreements also come with trade secret license agreements.

DECIDE WHETHER YOU’D WANT YOUR LICENSE TO BE EXCLUSIVE.

1. Exclusive

Those agreements that establish a unique relationship between the licensor and the licensee are exclusive licenses. The licensor accepts under all forms of licensing arrangements that the contractor is the only one who can make use of the IP. These normally cost the licensee more.

2. Non-exclusive

In a non-exclusive license, the licensor may be licensing the IP out to more than one licensee. These types of license agreements usually cost less for the licensee.

3. Sole

In a sole license, the licensor agrees to use just one licensee, but the licensor retains the right to continue to use their IP, as well.

DECIDE ON THE DURATION OF YOUR LICENSE.

1. Perpetual

A perpetual license is one where the licensee buys the right to use the IP just once and then can use it for a lifetime. Often, these are the more expensive type of license because the licensor won’t receive ongoing royalties. Perpetual licenses can be seen most commonly in software.

2. Term

A term license is organized one of two ways:

(1) the licensee can pay a one-time fee for a certain term or,

(2) the license can pay per use (these are traditional royalties).

Term licenses are common across all industries. Although many people don’t think of it this way, when you pay Netflix each month, part of that fee is a license to use their proprietary digital software.

As you can see, there are several types of licensing. A skilled and experienced IP attorney can assist you find out what type of license agreement you need, as well as what needs to go into that agreement.

Author: Lipika Sharma
Practical and well-oriented law student, pursuing her BA- LLB (Hons.) degree from Fairfield Institute of Management and Technology, GGSIPU. She is highly inclined towards Constitutional law, Criminal law, ADR, IPR, and Family law. However, she is keen on exploring emerging fields of law