Types of licences
An exclusive licence is the most common form of commercialisation. Many of the points made about exclusive licences apply equally to the other forms of commercialisation.
Types of licences
The licence from you as the owner to the licensee can be:
- an exclusive licence
- a sole licence
- a non-exclusive licence.
Variations on these basic licence alternatives include:
- a know-how licence
- a software licence
- a cross licence
- a trade mark licence.
What is an exclusive licence?
An exclusive licence is one where the licensee is given the right to commercialise the intellectual property (IP) to the exclusion of all others, including the licensor. Most IP licences are given on an exclusive basis.
As an IP owner, you benefit by granting an exclusive licence and receiving an agreed sum from the licensee (presumably a figure you believe compensates for your loss of future earnings), and by avoiding the risk of your product not reaching the market or being successful.
The licensee benefits from an exclusive licence by knowing that they will be the sole recipients of the profits coming from the time and funds they must now invest in bringing that product to a market-ready state.
As an exclusive licence confers protection against competitors commercialising precisely the same IP-based product or service, exclusive licensees will usually seek to increase their profit margins and rely on this for a greater return on their investment.
Shades of exclusivity
Exclusive licences do not always provide blanket protection for the licensee. There are 'shades' of exclusivity relating to:
- product restrictions: restrict the licensee's use of the IP to a particular class of product
- field restrictions: restrict the licensee to a specific field of application
- territory restrictions: restrict the licensee to a specific geographical area.
Why limit a licence?
Granting an exclusive licence subject to any of these limitations enables you, as the licensor, to achieve one of two objectives:
- to license some qualified rights to a licensee and to retain the residual rights to commercialise yourself in-house; or
- to license all IP rights to a number of different licensees, all being granted exclusive licences with complementing restrictions.
In the first option you may decide it is best for you to retain some commercialisation rights that you can conduct yourself. For example, you may decide to produce your IP product in-house and to partner with an exclusive licensee for the marketing, promotion and selling aspects of bringing your product to the market.
In the second option you may decide that while you have a great, marketable idea, you do not have the capacity to develop it further than the concept or prototype stage. In this case you may grant one company an exclusive licence to manufacture the product, another exclusive licence to market it, and another to sell your product. If you choose this particular strategy you may not retain any commercialisation obligations at all. Your return will be entirely from the licensing payments.
Last Updated: 10/12/2012