Am a student entrepreneur from Rwanda, my expertise is in intellectual property management , creative design and technology field
A company can get money from authorizing another company to temporarily access its intellectual property rights which can be manufacturing processes, brand name, copyright, trademark, patent, technology, trade secret, etc. for adequate consideration and under specified conditions in exchange for payment and this is called licensing.
Licensing is more than simply royalty collection. It is a highly sophisticated business that requires expertise in negotiation, quality control, brands, marketing, retail and manufacturing processes, and contract law. That is why while licensing, one ought to be vigilant and diligent in choosing the best licensing agreement. Should there be a bad decision in this regard, you may end up collapsing your business.
What is Licensing?
Today, it is possible to obtain permission from a company to manufacture or sell one or more of its products within a defined market area. Through licensing, you can obtain these rights usually on agreement to pay a royalty fee to the original owner. During licensing, you can get a potential growth of your products due to the fact that those third parties will be expanding the market. Something important to remark is that during licensing many get trapped in the agreement terms leading to more profits to the licensee, so the best way to do this is to ensure the agreement is in line with the business strategy you are using.
A licensing agreement is a written contract between two parties, in which an intellectual property rights owner permits another party to use those rights under a specific set of parameters. A licensing agreement or license agreement typically involves a licensor and a licensee
Intellectual Property Rights That Can Be Licensed
Any work without reward is vain and no one is interested in it. Whether physical or cognitive. There exists many intellectual property rights to protect your intellectual works that can be licensed; some of them are shown below;
- Copyright for literally and artistic works protects one’s work in all his days and 70 years after death.
- Trademark protects any sign, symbol or word that can be used to distinguish products/services of a company from another. The time of protection varies from country to country but mostly it is a 10 year duration which can be renewed indefinitely.
- Industrial design also protects appearance of your products and the protection time varies from 10 to 25 years.
- Patent protects inventions with a 20 year protection period from the date of filing the application.
Types of Licensing
We have three main types of licensing that one can choose from;
- The first one is an exclusive licensing. This is limited to a specific field geographical location, context, length of time or customer groups and you are not allowed to operate in the licensed field or grant those rights to others. This type of licensing will be good when you are granting it in a territory you wish not to compete in but you wish to invest in the development of market potential.
- Secondly, you can choose a sole licensing which is similar to an exclusive license except that you as the owner of rights grant a license in a specified territory (with an undertaking not to grant any other licenses in that area) but retains the right to use the intellectual property rights yourself in that territory.
- The last one is a non-exclusive licensing where you retain the right to license other third parties to simultaneously use the intellectual property rights licensed. Then you may exploit the intellectual property yourself also. This mostly persuades you not to invest in market development and non-exclusive arrangements tend to go well for intellectual property that can be exploited happily by many parties and/or that do not require serious investment to market. By this form of licensing customers are in profit due to competition and this tends to bring more innovation with high productivity to them.
But also there exist a cross licensing or IP exchange in which parties grant each other intellectual property rights license. These licenses are typically granted where blocking patents owned by competitors or other third parties interfere with an industry. Companies can gain freedom-to-operate through cross-licensing. for example They receive access to technologies through patent pooling , where several related patents and high standard patents are put together for the companies to cross-license .
Benefits of Licensing
Licensing can help a lot in reaching a new market which seems to be inaccessible. Other people do research and Comb such territories and are able to expand your market scope. Just like killing two birds with one stone the licensor enjoys the profit from ownership or production at the same time with royalties