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Meaning of Licence

1) When holder of an IP right wishes to permit


another person to do something that is within his
or her control as the IP owner, a licence may be
agreed upon.
2) Licensing is a process by which the right to use
intangible IP is granted by one party to another.
3) A licence is effectively a contractual agreement
and should set out precisely what the licensee is
permitted to do and any terms and conditions
applying to this use, including the amount of any
payment or royalty to be paid to the licensor.

Meaning of Licence
Licences can be limited in time, limited by
territory or limited by which exclusive rights
under the IP right are licensed.
Example: author of a book transfers the
copyrights of his creation to the publisher , so
that the publisher authorized to make multiple
copies of the original work for sales and
distribution.
For the transfer of rights , the publisher will pay
the royalty to the author based on the sale
proceeds of the book.

Three types of IP licensing


formats
Sole Licence:
No person , other than the licensee and the
owner , has the rights to perform the
activities stipulated in the agreement. The
owner may reserve certain rights for himself.
Example: The patent holder may keep certain
product features for him to manufacture while
to licensee he may allow to manufacture
similar product with limited features to mark
the product differentiation in the market.

Meaning of Licence
Exclusive Licence:
None other than the licensee(even the
licensor) can perform the activities
stipulated in the agreement. Such a
licence could be worthwhile where IP
owners do not want to exploit the IP
themselves as it may be possible to
seek a higher royalty payment than
for a non-exclusive.

Meaning of Licence
Non-exclusive Licence: The owner
of the creation is interested in
making multiple copies of his
creation and sell it to the end user
who is licensed to use it.
This happens in case of computer
programming wherein the user who
is the licensee to use the product is
restricted to make copies of the
same for selling and distribution.

Types of Licensing
Agreements
1) Licensing agreement is a
partnership between an intellectual
property rights owner (licensor) and
someone who is authorized to use
such rights (licensee) in exchange
for an agreed payment ( fee or
royalty).
2) A variety of such licensing
agreements are available which are
classified as follows:

Types of Licensing
Agreements
1) Technology Licence:
The licensor authorizes the licensee to use the
technology under certain agreed terms and
conditions. Through a technology licensing
agreement , it is possible to improve the
quality of existing product or develop and
manufacture a new product by using the
patents or trade secrets owned by others.
This may also include entering into a new market
or extending in the existing market for a
product by acquiring its patent rights.

Types of Licensing
Agreements
2) Joint Venture Licensing:
In a joint venture , two or more enterprises pool
their resources with the objective of
implementing a common business purpose. In
such agreements, one party will have a licence
for technology or technical know-how , to which
the other party may contribute financially and
implement the project.
The joint venture normally includes a licence
agreement between two parties to regulate the
use of the IPRs and compensation for its use.

Types of Licensing
Agreements
3) Franchise or Trademark Licence:
In franchising agreement , the franchiser through
agreement, allows the franchisee to use certain technical
or other expertise who has usually gained a reputation in
connection with the use of a trade or service mark. The
franchisee will bring in financial resources to provide
goods or services directly to the consumer.
The franchiser will ensure the supply of technical and
management skills to maintain the quality and other
standards in relation to the use of trade or service mark .
With the franchising agreement , the licensee market a
branded product or service having trademark protection
owned by others.

Types of Licensing
Agreements
4) Copyright Licence: the Copyright
licensing is done for manufacturing,
distributing or marketing the results
of literary and artistic efforts of
creators. Collective licensing is quite
common for use of material in the
copyright and related right area,
including performers rights.

Licensing Advantages
1) IP is like physical property in that it can be bought and sold
or otherwise transferred , inherited and so on.
For licensor the following are the advantages:
2) To the licensor in addition to one time payment , he may get
regular payment on the ongoing sales by way of licence fees
and royalties respectively.
3) in case the owner does not have money or other resources
to use or commercialize his invention or IPR, he may transfer
the licensing rights to some one who is willing and has the
necessary resources to develop, commercialize and market the
product.
4) The greatest advantage of licensing is that it increases the
profits by using an available technology to make new improved
product to sell in the market at an appropriate time.

Licensing Advantages
For the licensee the advantages are:
1) The licensee need not have to spend money and
time in the rigorous process of R &D.
2) It is a cost effective process to get into the market
with new product at a greater speed.
3) The new technology will help the licensee enhance
his reputation and goodwill in the market.
4) The valuable technology will make it easier for the
licensee to get finance and finally cash the market
opportunities by timely commercializing the
product.

Licensing Disadvantages
1) Through licensing the owner may lose his
control on the technology.
2) There might be great risk of piracy and
exploitation by unauthorized parties.
3) It is possible that the licensee develops
technology around the product, he has the
licence for and makes the original licensor to
lose his superiority.
4) The revenue from the licensee depends on his
performance , hence the licensor loses revenue
to that extent.

Licensing Disadvantages
1) For the licensee the technology
may become redundant in short span
of time and he may have to go in for
a new one at higher price.
2) In case the technology is not
tested , the licensee will be at great
risk of losing the money if relevant
risk aversion clauses are not
stipulated in the agreement.

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