A license grants permission to another party to exercise certain intellectual property rights; they can be exclusive or non-exclusive and cover copyrights, trademarks, patents, and/or trade secrets. License agreements lay out the type of license, the rights the licensee can exercise, when the rights are terminated, and the amount paid to the licensor.
Type of License
Licenses are typically categorized as exclusive or non-exclusive.
Exclusive licenses grant the licensee, and only the licensee, the sole ability to exercise the rights laid out in the agreement; this means that not even the licensor can exercise these rights. This is important to note especially for intellectual property intended for multiple licensees to use simultaneously.
Non-exclusive licenses grant a licensee access to the intellectual property, but does not guarantee exclusivity, even in terms of region and/or industry. A non-exclusive license allows the licensee to exercise the rights laid out in the agreement, but the licensor can still exercise those rights and can license those same rights to others.
Which Rights are Included
The rights included in the license depend on which kind of intellectual property is being licensed and how many rights are required by or offered to the licensee.
For example, if you are licensing a play for production in October 2021 in the Bay Area, you will want your license to include all rights that allow you to put on the production and use the name of the play and playwright in your advertising. You may not be able to negotiate an exclusive license, but a non-exclusive license could still potentially give you a regional exclusion or maybe even a time period when no other productions could open within a certain mile radius of your production.
Another important piece of the license agreement is the term, or how long the agreement is valid for/when the agreement is terminated. Termination can be a set date, a period of time, or even triggered by a specific event. Do you want someone to exercise the licensed rights through January 31, 2023, or six weeks, or only until the second edition of your book is released? Whatever the length of time or termination triggering event(s), make sure the terms are clearly stated in the agreement so both parties know when the licensee is no longer allowed to exercise the rights under the license.
License agreements also include the amount paid to the licensor for allowing the licensee to exercise the intellectual property rights. These payments can either be in the form of a flat fee,[i] royalties,[ii] or both. Whichever payment option is right for your licensing arrangement, make sure the amount and/or percentages are included with a payment schedule.
The scope of a license agreement can vary dependent on its purpose. Are you licensing a piece of software created for one intended licensee or do you want the entire world to have access to it? Do you want to license the West Coast premiere of a new musical? Do you want your educational materials accessible to anyone or just those who registered for an online class?
The above license agreement terms are not exhaustive, but an experienced attorney can help guide you through drafting and/or implementing a license agreement, either to license your intellectual property rights or someone else’s.
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[i] This is different from a fee paid for a transfer/assignment of rights. This fee isn’t paid to buy the rights, but merely to use those rights without infringing them. The licensor/intellectual property owner retains ownership. [ii] Payments made to the licensor based on a percentage of income earned from the use of the licensed intellectual property.