Licensing Agreements and Advice from a Los Gatos Software Licensing Attorney
Intellectual property licensing is a strategy that is often key to the success of technology-based businesses. An intellectual property license is an agreement between the owner of the IP (the licensor) authorizing another party (the licensee) to use the IP under specified conditions (place, field of use) in exchange for compensation.
Patents or patentable inventions; know-how; trade secrets and proprietary information; copyrights; semiconductor designs; and trademarks can all be licensed. If you believe that IP licensing could advance your business interests or if you are in negotiations over IP licensing, or developing a set of form license agreements to implement your licensing program, Los Gatos software licensing attorney Marc David Freed from The Freed Law Firm can provide you with expert legal counsel.
Benefits of IP Licensing
There are many reasons the owner of intellectual property may choose to license it. For example:
- Licensing allows the IP owner to retain ownership of the IP while obtaining additional revenue from the IP.
- The IP owner may not have the desire or resources to do the manufacturing, distribution, or marketing needed to commercially exploit the IP. Or the IP may need to be incorporated into another product that the IP owner does not make.
- A license may give the IP owner access to new markets it otherwise would be unable to penetrate.
- A license may give the IP owner access to improvements or products that are developed by the licensee during the term of the license.
- A license may be a way to settle an infringement claim without expensive litigation.
IP licensing may also benefit the licensee by providing it with improved technology that it wouldn’t have the ability to develop or acquire otherwise, or new products or established brands to market.
Key Provisions of IP Licensing Agreements
Licensing agreements can be complex documents requiring difficult negotiations and precision drafting. Marc David Freed, a Los Gatos intellectual property attorney at the Freed Law Firm, can assist you in negotiating a licensing agreement that protects your interests. When negotiations are concluded, we can custom draft a written document that is accurate, clear, and legally enforceable.
Many key provisions should be included in an IP licensing agreement. Four of the most significant are:
- What is being licensed. The property being licensed needs to be clearly described either in the agreement itself or in exhibits attached to the agreement. Ambiguities can lead to disputes after the license is signed. Before signing on the dotted line, the licensee often wants to examine the intellectual property. A confidentiality agreement requiring one or both parties not to disclose confidential information learned during negotiations can facilitate this.
- Scope of license. The agreement should describe what the licensee can do with the technology—use it; incorporate it into other products; sell or distribute it in certain markets; make it; modify it; sub-license it. If the licensee has the right to modify the intellectual property, who owns the modifications? Does the licensee have the exclusive right to the technology or can the licensor simultaneously license it to others? The licensee typically seeks an exclusive license if it must make a large investment in the property that cannot be used for other purposes. The licensor may be able to minimize the negative impact of an exclusive license by conditioning the exclusivity on receiving a certain level of royalty or limiting the length of the exclusivity clause.
- Compensation. When negotiating a price, each party needs to understand its bottom line. The licensee needs to know what it can afford to pay. The licensor needs to know how much it needs to make a sound return on its investment. Parties often rely on one or more of the following factors in establishing a price: the cost to the franchisor of developing the IP; the income the licensee is expected to generate from the license; and the price paid for similar licenses if any can be identified. A related issue is whether the technology has to perform to certain standards or pass tests before the licensor is paid.
- Payment method. Payment is usually in the form of a lump sum, an ongoing royalty, or combination of these. Some of payment issues that need to be addressed are: what is the royalty percentage; will the royalty be computed on gross or net revenues; and will there be a minimum or maximum royalty, royalty advances, or adjustments over the term of the license? Sometimes payment is in the form of a cross-license in which the parties exchange licenses of similar value.
- Indemnity issues. Some of the most disputed issues in any licensing transaction concern who is responsible if the licensed technology or products incorporating it are claimed to infringe a third party’s intellectual property rights.
Call a Los Gatos Intellectual Property Attorney for Assistance with Negotiating, Drafting, and Evaluating IP Licensing Agreements
The Freed Law Firm helps individuals and businesses in the Silicon Valley and Santa Cruz areas safeguard their intellectual property rights and profit from their inventiveness. We can assist you with:
- Patent, copyright, and trademark licenses.
- Know-how licenses and transfers.
- End-user license agreements (EULAs).
- Click licenses.
- Software as a Service (SaaS) licenses.
- And a host of other IP agreements and transactions, including joint development agreements.