Licencing IP – What are the considerations?
Exclusive, non-exclusive, or sole licence:
Basically – what degree of exclusivity will the IP licence grant to the licensee? This will depend on both parties’ particular wishes, and the kind of IP being licenced.
- An exclusive licence means that only the licensee is allowed to access and use the IP being licenced;
- A non-exclusive licence allows the licensor to use the IP themselves, and the licensor may also grant further licences to others; and
- A sole licence allows the licensor to use the IP, but disallows further licences to others.
Commercial or non-commercial:
Non-commercial use means the licence will not be used to make money, generate promotional value, or have an impact on the market. Or the licenced IP may be used to create revenue – but by a not-for-profit organisation, or for a charitable purpose.
Commercial use is the opposite (obviously) – where the IP licence is going to be used to assist the licensee to benefit financially now or in the future. This all may seem very simple, but in some cases it is not clear-cut, and legal advice could be required.
Who will the licence rights extend to under the agreement?
You will need to consider who needs to use the IP being licenced? Commonly it is authorised employees, agents, and subcontractors of the licensee, but this will be individual to your situation.
Slightly different to the licence rights – the right to share confidential information will need to be outlined in your agreement. Sharing may be allowed to advisors, employees, and sub-contractors, on a need to know basis… And limited to situations where the information is required in order to perform obligations of the agreement.
What fees and charges will be required
Before drafting your agreement, think about what fees and charges would be fair consideration for the IP licence. Will there be a subscription cost? Hosting Charges? Upgrades? Telecommunication fees? Any technical or other necessary costs specific to your IP licence should be clearly spelt out in your licence agreement so there is no misunderstandings about money.
Confidential information
It is important that confidential information about the IP being licenced is protected at all times under your agreement – including during negotiations, discussions and meetings.
Your agreement should bind both parties to protect and preserve the confidential information of the other party. Specific rules preventing certain kinds of behaviour should certainly be included – such as disallowing use of the confidential information for any purpose other than the performance of the agreement.
You may like to require parties to enforce the confidentiality obligations against any breach under your agreement also, for further protection.
Non-compete
Consider what kind of non-compete clause is appropriate for the IP you are going to licence. Obviously for the term of the agreement, and a certain amount of time afterwards depending on what the IP is, and what is reasonable in the circumstances.
In summary, a non-compete clause prevents the licensee from attempting to take a client or customer of the licensor, or assist in the development of an idea or technology that would be competition to the licenced IP.
Indemnity
It may seem unnecessary (and hopefully is unnecessary in your circumstances!) but indemnity must be included in your licence agreement as legal protection. This holds the licensee legally accountable in situations where:
- There is an unlawful or negligent act by the licensee;
- There is a breach of IP rights by a third party; or
- There is a breach of any warranties in the agreement.
Please call us at Sinclair + May if you have any questions – you may be entering a licence agreement, or have developed IP that you would now like to licence? We would love to have a chat about it, give you some legal perspective, or help draft the right agreement for you.
This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation.
Published Oct 24, 2018
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