The Basics of Licensing

What Is Licensing?

Licensing is a legal agreement between the owner of intellectual property such as a copyright, patent or trademark and someone who wants to use that IP. The licensee pays "rent" to the licensor for the use of an idea/product/process that is otherwise protected by IP law. Like a lease on a building, the license is for a specific period of time, though it may provide for future renewals. The licensee uses that idea/product/process to sell products or services and earn money.

Rights and Responsibilities

The licensee is "renting" the IP rights and does not own them. The licensing agreement may restrict the licensee to a specific geographical area or put other restrictions on their ability to use the licensed property. This is similar to the difference between owning and renting a home. A homeowner can make very big changes in owned property but a renter is limited by their lease from making major changes without the agreement of the landlord.

The licensor is responsible during the term of the license for maintaining and defending the value of the intellectual property so that the licensee can profit by producing goods or services using the licensed property.

What sorts of things get licensed?

Anything that can be protected by copyright, patent, trademark or trade secret can be licensed. Trade secrets are particularly sensitive for their owners to license. Trade secrets are only useful IP as long as they are indeed secret. The more people who know about it, the more likely it is that the secret will become known. If everyone had the exact recipe for Coca-Cola, there would be bottling plants around the world producing something that consumers would know was exactly the same as Coke.

Usually, licenses are granted for IP like:

· Technology
· Software
· Manufacturing processes
· Products
· Music
· Art
· Literary material