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What is Involved in Licensing Intellectual Property?

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  • Written By: Karize Uy
  • Edited By: Lauren Fritsky
  • Last Modified Date: 03 December 2016
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    Conjecture Corporation
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Licensing intellectual property involves an agreement between two parties. The licensor, or the owner of the intellectual property (IP), gives permission to a licensee to use the IP. The two parties first discuss the manner and limitation of the IP usage, then a contract is usually drawn for a concrete proof of the agreement. It also entails compensation from the licensee in exchange for using the IP. This compensation is often labeled as royalty, which will be continually paid to the licensor until the contract’s expiration.

This agreement also requires both parties to know the specific property itself, whether it is a trademark, patents, copyrights, or an industrial design. Even trade secrets can be considered intellectual property. The type of intellectual property will decide which contract will be drawn up. Some kinds of contracts include technology license agreement, copyright license agreement, and trademark licensing and franchising agreement. Each contract treats each intellectual property in different manners, according to the latter’s legal nature.

Both the licensor and licensee should stipulate several important elements in licensing intellectual property. One important consideration is the limitation of the intellectual property. This can include the field in which it can be used and geographic constraints. Licensors should also state whether or not they will allow any editing or improvement on the creation. Another important element is the royalty, in which both parties should agree on the amount, frequency, and method of payment.

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Also crucial in licensing intellectual property is the resolution of dispute. If the licensee is found to violate the contract, certain consequences should be agreed upon, such as financial compensation or termination of contract. In some cases, a licensor can specify that he is given credit as the creator of the intellectual property. For example, writers, photographers, and image artists who are licensing their works to publishing houses can require a byline.

Many creators are attached to their works because much labor and knowledge was put into the process of creation. Licensing intellectual property provides a venue for creators to benefit from their property while still maintaining market exclusivity on it. Likewise, licensees can also benefit from using the IP without having to exert as much effort as the licensor. It is best that both parties obtain legal representatives when licensing intellectual property. This is to ensure that the licensee has intellectual property protection and that the licensor is assured of giving reasonable compensation.

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