Intellectual Property is just that — property. It is a very valuable asset to the owner. It can be brought and sold, used as leverage, and licensed. Licensing Intellectual Property is a great source of income for IP owners. Licensing Intellectual Property serves two purposes for the IP owner: It provides valuable income and a way to further market and grow the owner’s business or IP in the market place.
An IP owner should seek or approach a potential licensee in the following circumstances:
1. If the potential licensee is an infringer. An IP owner can make it a win/win situation for both parties. The IP owner can receive income for the infringer using the owner’s IP. Also, the IP infringer gains the reputation of the IP owner and becomes a licensee rather than an infringer. Both parties can now make satisfactory income from the arrangement.
2. The IP owner wants to expand its product or services. By licensing the IP to like-minded licensees, the IP owner can expand its brand into other geographic areas or markets. It also allows the IP owner to expand its customer base.
How to License IP
1. First make sure you own the IP you want to license. An IP owner will need to prove to the licensee that the IP owner has rights to the Intellectual Property. Evidence can be demonstrated by USPTO and Copyright Registrations. In addition, if the IP owner acquired the IP from another owner, a transfer of ownership agreement should be presented.
2. Determine the value of the IP. IP Licensing fees can range from 1 to 20 percent of the sales of the licensee. The royalty fee or licensing fee depends on the value of the IP. If the IP is unique, the licensing fee is higher. If it is common, it is much lower. An IP owner can hire an IP agent to determine the value.
3. An IP owner should ensure that they receive a minimum licensing fee regardless of the licensee’s sales. This will ensure the IP owner receives compensation for their IP regardless of the licensee’s sales.
An IP owner should hire a IP attorney to draft an effective licensing or royalty agreement to ensure the agreement protects the IP owner’s interest. The agreement will include such particulars as how the IP should be used or displayed. The brand has to be communicated correctly so it does not use its value.
