Licensing your intellectual property
If you own intellectual property then you have the right to authorise other people to use it (aka license the use) if you wish. Before you do, here are some considerations you should be aware of.
Licensing your intellectual property (IP) allows you to:
- Retain ownership and quality control.
- Make more money through royalties and licensing fees.
- Grow your brands and reputation.
If you wish to license the use of your IP to others, you should have a formal licensing agreement in place. This is the agreement between you (licensor) and the authorised user (licensee) that will confirm things such as:
- Where the licensee is allowed to use and/or promote your IP;
- The manner in which they are allowed to use and/or promote your IP;
- The quality of any use and promotion of your IP;
- The fee they will pay to you for the right to use and/or promote your IP;
- The length of time they will be allowed to use and/or promote your IP; and
- Any other terms you see fit.
I would always suggest seeking assistance to draft an appropriate licensing agreement if you wish to provide license to other people to use your IP.
In order to license the use of your IP to others, you will need to be sure that you are in fact the owner of that IP. For example, if you are the original creator of certain ‘works’ then you will be the copyright owner and entitled to license the use of your copyright to others. However, if you outsourced the creation of those works, it may be that the contractor is actually the copyright owner and therefore it’s not yours to permit others to use.
"In order to license the use of your IP to others, you will need to be sure that you are in fact the owner of that IP."
Likewise, if you have coined brand names or designed logos for your products, authorising others to use those brands or logos first requires you to register them as trade marks. If you have not registered your brands and logos as trade marks you do not necessarily have the right to license use to other people. If you do, your licensees may actually be infringing the rights of someone else who has registered those trade marks.
Want more articles like this? Check out the innovation section.
Royalties and licensing fees
There is no set rule as to how much you can charge, or should pay, in licensing fees. Ultimately, the two parties to a licensing agreement will need to come to an agreement as to an appropriate fee for the use of the involved IP. This could be a percentage of sales relating to the particular products or services, or an amount per unit sold. It could even be a one-off fee, or a yearly fee (not based on sales).
A good place to start is to review licenses of other companies in your industry to see how they charge. For example, if you are in the computer software industry you might review Microsoft licensing options as a guide; if you are in the food industry you might review the licensing options of Kraft Foods Pty Ltd etc.
Licensing other people’s intellectual property
If you wish to use someone else’s IP you will likely need their permission to do so, and, will likely be asked to agree to the terms of the owner’s licensing agreement, including payment of royalties or licensing fees to them.
How to determine if you need permission
Ask yourself whether you will ultimately be making money, in part or in full, due to your use or promotion of someone else’s IP. If the answer is yes, then you’ll likely need their okay to use it. Most people are not going to appreciate you making money off their hard work and investment!
This could be the use of someone else’s software, artwork or literature (copyright), someone else’s brands, logos or names (trade marks), someone else’s business technologies or inventions (patents). It could even be the use of someone else’s reputation in the marketplace.
If you’re not sure, always seek advice and assistance. Never assume it’s okay to ‘cash-in’ by selling products that involve other people’s brands, logos, colours – or any other IP.
Have you ever licensed your own or others’ intellectual property?