Licensing and License agreements
- What is a license
License agreements are arrangements where the right to use a technology is formalised contractually. A License agreement does not transfer the ownership of IP rights and the owner can put limitations and obligations on the licensee.
- The main reasons to negociate a License
In order to exploit the financial potential of an innovation, people often think of direct exploitation of IP rights by their owners or by means of a joint venture. But for many reasons it is not always possible. An alternative is the licensing approach. Relevant factors to consider are:
- Is there a need of immediate cash flow by the company
- Is further development of the protected technology required before reaching the market
- If the technology is outside the firm's core line of business or interest area: for example, the product is not suitable for export due to unit volume, regulatory differences or lack of expertise in foreign markets.
- Negociating license agreements
As licences play a great role particularly in the operations of high-tech companies, it is important for corporate decision-makers to understand the basics of licensing and the strategies implemented through license agreements:
- There is a great need of time and effort before initiating collaboration or a licensing agreement. It is important that a very extensive and careful search is carried out to identify a suitable license partner. The IP owner must be sure that the partner has the expertise, resources and commitment to exploit the particular product or service. One may start with an option arrangement whereby the potential licensee is given an opportunity to investigate the market and satisfy the IP owner that a fruitful partnership could ensue.
- Collaborative R&D and licensing offer the prospect of resource and information sharing and the fast conversion of an innovation into high quality products. Furthermore, it can offer the ability to share skills and technologies and to access markets which would otherwise be inaccessible.
- Licensing as a component of a technology transfer arrangement is attractive where the venture is viewed in the context of a long-term relationship between the parties involved.
It must be remembered that licensing is a two-way process and can involve any type of IP rights. Terms and conditions for licensing agreements are usually negotiated on a case-by-case basis.
Various types of licences are used. Some common considerations apply to all types, while other issues arise only in particular types of licences. You must seek advice from your legal representative on what should or should not be included in your own agreement document.
- PDFs and links
This guide is dedicated to the licensing of biotechnologies.