Licensing: why and how?

Exploitation of intellectual property rights can, generally speaking, be done in various ways: a company may (and mostly will) choose to use its intellectual property rights in developing (new) products and rendering services.

Nevertheless, holders of intellectual property may – under certain conditions – be willing to grant rights in connection with their IP to others. The best-known example is the rights of use many of us have (or at least should have) obtained in relation to the use the software installed on our computers. In this respect, the company that developed such software exploits the intellectual property rights contained therein. However, this is not a real ‘licence’ in the strict legal sense of the word, but a mere ‘right to use’ the software, which is granted to the ‘rightful’ or ‘lawful user.’

The tendency (or is it need?) for companies to develop and market new products faster urges them to obtain access to technologies owned by other companies for use in the manufacture of such products. In such a case, the first company needs to obtain the right to exploit the intellectual property rights owned by the others, which can be done in two different ways:

  • the company owning the technology can transfer the intellectual property rights therein to the requesting party (transferee) – we will deal with this issue in the following Part;
  • the company owning the technology may choose to grant a licence to the business wishing to incorporate the technology in its own products or use it in connection with the rendering of services (the licensee).

Most intellectual property rights are capable of being assigned and the holders thereof can grant third parties the right, exclusively or otherwise, to apply or use the relevant intellectual property within all or any number of the countries for which the right has been granted and in accordance with the statutory provisions. In addition or alternatively, they can grant such third parties the right to confer the right to do so on others.

In any case, negotiating and entering into a licence agreement concerning intellectual property rights is not to be done haphazardly: please find a few of rules of thumb to be taken into account when dealing with IP licence and/or transfer agreements here.