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Contractual Agreements to Maximize Gains - Licensing Agreements

In the introduction to this part of the site, we mentioned that the big advantage of IP rights is that, in view of their intangible nature, they can be “rented-out” as many times as you wish. This process is called “Licensing”.

While your apartment (as well as any other tangible property) can be rented out only to one person at the time, your trademark, patent, and other IPRs can be licensed to … 5, 10, or 40 licensees in different geographical areas at the same time. Can you imagine the potential income for you?

IP Licensing is a process whereby the holder of an IP grants permission to third parties to utilize his/her IP asset/s for a specified duration, for a specific purpose, on a particular territory, and under agreed upon conditions. These terms are agreed upon between both the parties and are stated in a contract: your licensing agreement.

Licensing is one of the most frequently used ways of commercializing an IP asset and earning money out it. You might as well learn how it works!


Let’s first see what are the most significant advantages of licensing if you are the Licensor, i.e.: the owner of the IPRs:

  • You will be able to earn money in terms of licensing fees and royalties.
  • You will be able to expand your business to new markets in other countries, that you would never be able to reach by yourself.
  • If you choose the right licensees, you will able to capitalize on:
    • Their local knowledge, network and expertise in their respective geographical areas;
    • Their distribution and/or manufacturing capacity;
    • Their capacity to introduce the necessary adaptations that may facilitate penetration of their local markets;
    • The valuable knowledge that they may generate from exploiting your IPRs.
  • If you are lucky, your Licensees might even be able to improve the products or services encompassing your IPRs.
  • You will be able to maintain oversight and control over the way in which your IPRs are used.


Let’s now list the potential benefits and advantages of acquiring an IP license for the Licensees:

  • You could start using advanced technological know-how and valuable brands without having to create them yourself, as this systematically entails significant investment in terms of money and time. In this context, remember that even bigger corporations do not carry out all the R&D by themselves, and prefer sometimes to acquire some IPRs from counterparts.
  • You can therefore save time and money when you try to enter a new market with a better product.
  • You may learn new skills that can help you in your business strategy.

For more information about licensing agreements, including the different types (exclusive / non-exclusive), remuneration issues, and many tips on how to negotiate an agreement that will allow your business to prosper, please refer to the Handbook on IP Commercialisation (Section C.2). Last but not least, you need to remember that licensing agreements are among the most complex types of contracts. It is therefore highly advisable to consult an IP lawyer for their drafting.


Next page: Technology Transfer Agreements

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