What Do I Include In a Licensing Agreement? An Intellectual Property Licensing Agreement is a written, legally binding contract effectuating an agreement between an owner of intellectual property (“Licensor”) and a party wishing to use that intellectual property for a particular purpose (“Licensee”). One who has a license to use another’s intellectual property does not own it, but merely has the right to use it. Therefore, certain elements must be addressed in any comprehensive Intellectual Property Licensing Agreement. The following are the most important areas to address: 1. Scope of the License: The first thing a license agreement should do is to clearly define the scope of the license. By licensing a product, you are assigning a limited right to use that property, so you must be sure to retain the ultimate ownership rights. At the same time, you don't want to be overreaching or too limiting so as to discourage potential customers from using the product. 2. Exclusive vs. Non-Exclusive. Except for custom-made products, a license agreement would typically be non-exclusive, meaning that the licensor can sell the same rights to other users. However, this wouldn't necessarily allow the licensee to reproduce or pirate the product and sell it to third parties. Sometimes, licenses allow reproduction within a controlled environment such as with enterprise licenses or network licenses. In other cases, a licensor may allow for a resale license, with a royalty being paid to the licensor. 3. Revenue Streams. Next in importance are provisions controlling revenue streams generated by licensed products. With most license agreements on end user software for consumers, for example, a one-time license fee is usually paid when the software is purchased. Other arrangements may include recurring payments such as royalties or monthly lease payments. License agreements may also cover maintenance charges such as ongoing maintenance. Other topics to cover include: 4. Term and Termination. The length of the agreement should be designated. The parties must also agree whether or not the agreement will terminate upon a change of control of licensor or licensee. If a change of control will affect the agreement, it must be defined specifically. In addition, this provision should state whether or not the agreement may be terminated by either party for breach, and if so how. 5. Prohibited Uses. The licensor may wish to prohibit the licensee from using their intellectual property in certain ways that could embarrass or otherwise devalue the property. The licensor will want to include these provisions here. 6. Rights to Transfer and Sublicense. The licensor may or may not wish to grant the licensee the right to transfer or sublicense the property at issue. The licensor may want the right to approve or reject potential sub-licensees, or prevent sublicenses all together. These are the most important areas an Intellectual Property License Agreement must address. Further provisions covering the rights to source code (if software is
involved), acceptance, testing and training procedures, warranties, limitations on the licensor's liability, support and maintenance services, nondisclosure of confidential information, indemnity for infringement, enforcement of remedies, and terminating the contract should also be included.