A licensing agreement is a method of allowing third parties to use your intellectual property right under certain conditions, while retaining your ownership.
Intellectual property rights give you a monopoly for exclusive exploitation of certain products for a defined period. Usually you will have spent a lot of time, effort and, therefore, money to develop these products. It is therefore only fair that you should receive an exclusive right to capitalise on your efforts for a certain period of time. But what if you can see no possibility of doing this, or otherwise cease to have that opportunity? Were your efforts in vain? Has the money you spent on creating these rights gone down the drain?
The licensing agreement
If you allow third parties to use your trademark, patent, design or other intellectual property right, this is known as licensing. This licence should generally be set out in writing and it is advisable
– and sometimes necessary
– to have the licence entered on the relevant register. In that case, the licence is also valid for third parties, so that they cannot claim ignorance.
A licensing agreement can be a private deed without recording by a notary. However, proper provision for a number of aspects needs to be made in such an agreement. We list the main conditions below:
What must the licensee pay for this licence?
A periodic payment or lump sum? Often it is advisable to agree a lump sum for the costs of the development contracts followed by a periodic payment dependent on factors such as net proceeds of sales, market profile, etc.
How long does the licence last? For which territory is the licence valid? Is the licence exclusive or not? In other words, can the licensor grant the same right to others as well, or do you hold an exclusive right?
What if the intellectual property right is infringed? Who can or must take action in that case, and what can be required?
For designs and patents: what powers does a licensee and/or a licensor have to develop the product further?
What qualitative requirements apply?
What form must advertising take, or how must the intellectual property right be exercised?
Can the licence be granted ‘free of charge’ within a group of companies? If not, what is the minimum amount and what are the tax implications?
On the subject of tax implications: are there routes that can be mapped out for the more effective capitalisation of an intellectual property right? These and a number of other issues can and must be governed by a licensing agreement. Our specialists can advise you on this. Another important point is that we, too, are a business and understand the importance of the effective, respectful but lucrative capitalisation of your brainchild, and are able to achieve this properly.