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Your business’ intellectual property (IP) is one of its most vital assets. It is essential to know your options for providing others access to that IP for commercial reasons. A well-known trade mark or a market-leading patent can generate a significant return on investment. Especially when compared to physical property like buildings and equipment. Managing your business’ IP in this way can help maintain or strengthen your position in the marketplace. This article will explain two of the most common ways to get a direct commercial benefit from your IP, a licence or an assignment, and how to know which is right for your business.

What Is an IP Licence?

An IP licence is a contract where the IP owner (licensor) permits someone else (the licensee) to use, but not own, certain IP assets under agreed terms and conditions. If you or your business is the IP owner, you are usually paid royalties for lending your IP. Common terms include a time limitation and restriction on geographic areas or territories. It is best practice for both parties to seek legal advice. You should engage a specialised IP lawyer if you are looking to license out key IP assets.

Naturally, the terms of use outlined in the agreement should secure your best interests. During the negotiation with the other party, always seek to protect your business priorities.

There is a range of different forms this agreement can take. For instance, types of licences include:

  • exclusive, where the IP owner grants only one licence and is not able to use the IP themselves;
  • non-exclusive, where the IP owner can grant more than one licence and can use the IP themselves; and
  • sole, where the IP owner can grant only one licence and can use the IP themselves.

What Is an IP Assignment?

An assignment is a sales contract that permanently transfers ownership of IP rights from your business’s particular IP assets or whoever the current owner is (the assignor) to the new owner (the assignee). An assignment must be signed and dated by the parties and witnesses and is a formal legal document.

The difference between an IP assignment and an IP licence is that an assignment transfers ownership and title. It is a permanent change. On the other hand, a licence is a contractual right to use IP in a way that would otherwise be an infringement of IP rights. Usually, after an assignment, the IP’s original owner (the assignor) has no further rights concerning the IP in question. However, with an IP licence, the licensor retains ownership of the licensed rights and typically has continual rights, obligations or whatever is set out in the licence terms. 

How Do I Know Which Is Right for My Business?

In general, you may want to give another party access to your business’ IP (whether through an IP licence or an assignment) so you can get maximum value from your business’ IP. Businesses often overlook the potential value in their IP. Consequently, you can lose out on the potential benefits that the IP may accrue. You and your business may want to consider licensing or assigning your IP if there are no current or future plans to use it.

Whether a licence or assignment is right for your business depends on a range of factors. Such factors include your immediate financial or cash flow needs and the importance of the IP to your present and future business. 

You should also consider the payment structure that your business would benefit from when assigning or licensing your IP. Licensing your IP will mean that you have a flow of royalties over an agreed period. If you instead choose to assign your IP, you will receive a lump sum. The most appropriate choice for your business may depend on which option offers the most commercial value.

Key Takeaways

Both IP licences and assignments are ways of extracting value and revenue from your business’ valuable IP. The difference is that while a licence provides rights to use your IP for a certain period or under certain conditions (usually while they pay royalties), an assignment is a sales contract to permanently transfer ownership of IP rights for a sum of money. Both licences and assignments can be big decisions for your company. Therefore, getting specialist advice from an IP lawyer is recommended.

If you have any further questions about IP licences or assignments, contact LegalVision’s IP lawyers on 0800 005 570 or complete the form on this page.

FAQs

What is an IP Licence?

An IP licence is a contract where the IP owner permits someone else to use (but not own) certain IP assets under agreed terms and conditions, typically for royalty payments.

What is an IP Assignment?

An assignment is a sales contract that permanently transfers ownership of IP rights in the particular IP assets from one entity to another.

What is an exclusive IP Licence?

While an IP licence is where the IP owner allows another person to use that IP for some time, an exclusive licence is where the IP owner agrees to grant only one licence and cannot use the IP themselves.

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