Licensing involves allowing another party to use intellectual property in exchange for compensation. It allows the property owner to benefit from their invention without having to undertake commercialization activities. Licensing can provide income, access to new markets, and help spread development costs for the licensor. For the licensee it enables growth opportunities by building on another's intellectual property. The document provides an overview of licensing, the benefits to both parties, and how Business Link can assist with finding licensees and drafting licensing agreements.

1. Licensing
at the IP/Licensing Clinic
Set Squared, University of Southampton
27 November 2007
Bernard Brooks
Business Adviser - Innovation
Business Link South East

2. What is Licensing?
Licensor Licensee Product or Market
Knowledge/ process
Intellectual
Property
Royalties/ Revenue
License fee £ £££££
Inventor/SME/ Market supplier of
related Customers
University
products/processes

3. What is Licensing?
Licensing is a process whereby the licensor confers upon a
licensee, by agreement, the legal right to use the intellectual
property owned by the licensor.
It is often used when the owner of a product/process does not have
the necessary expertise, resources, time or indeed the inclination to
successfully manufacture/operate/market the particular
product/process. The owner grants a licence to a third party who has
the requisite business acumen, knowledge and experience to
operate, manufacture and market the product/process in a certain
territory on behalf of the owner, in exchange for some consideration,
such as a royalty on sales for the duration of the contract.
A shorthand definition of a license is "a promise (by the licensor)
not to sue (the licensee)."

4. The Benefits of Licensing
To the Licensor: To the Licensee:
Licensing income New source of turnover
Access to production facilities with little or no Improved utilization of existing
capital investment production facilities
Access to new markets or fields of use with Broadened or diversified market
little or no capital investment position
Payback on IP development cost Reduced R&D cost
Business partnership Organic growth
Profiting from residual value in old technology Getting an easy start
Can promote cross licensing – access to Ditto
complementary technology
(Universities) Knowledge Transfer Industrial growth/
renewal/diversification
(Universities) Improved public relations High-tech reputation

5. How Business Link can help
Is licensing the right channel to market for you?
What IP are you licensing? – an IP review
What are you granting?
What do you want out of a license agreement?
Your ‘wish list’ of terms
Advice on finding potential licensees and the
final selection
Help with arriving at a draft Heads of Agreement
►
(When H of A agreed, hand over to licensing
legal professionals to create a binding contract)

6. What are you licensing?
Your Intellectual Property
- an intangible or ‘hidden’ asset of an organisation or an individual
resulting from some creative activity. It often has a commercial
value and can take the form of trade marks, registered or
unregistered design rights, UK or foreign patents, copyright,
confidential information, trade or business names, logos, database
rights, know-how, technology and other intellectual property rights
whether registered or not in any country.
Intellectual Property Protection
IP Protection gives you exclusive rights, making it easier to stop
other people from copying or using your IP without your
permission.
Patents, Copyright, Trade Marks, Design Registration
The more IPP you have, the more you have to offer a licensee and
the better negotiating position you will be in
More info on UK IP Office website: www.ipo.gov.uk/whatis.htm

7. What are you granting?
The licence agreement grants the licensee the
rights to use the Intellectual Property
It is here that the scope and nature of this
permission is specified
Areas covered are:
What IPR? Where registered, if at all?
Use of the IPR e.g. manufacturing, marketing, copying?
Territory to be covered?
Exclusive, non-exclusive or sole license
Term of the licence
Assignment (Sub-licensing)

8. Contact points for further advice/help
Email: innovation@businesslinksoutheast.co.uk
General Business Link Tel. number: 0845 600 9
006
Website: www.businesslink.gov.uk/southeast
Business Link adviser:
bernard.brooks@businesslinksoutheast.co.uk
Tel: 01202 587953

9. Heads of Agreement (or MOU)
A non-binding declaration of an intention to work
together towards establishing a contractual
licensing agreement
It covers the main contractual and legal terms of
the proposed agreement, particularly the areas
where there is likely to be negotiation
It may include a clause which requests that, for a
limited period, you will not negotiate a similar
agreement with another potential licensee.

10. Main areas to be covered under a H of A
The IPR and licensor’s grant of rights
Exclusive, non-exclusive or sole rights?
Territory
Each party’s obligations
Term
Consideration
Warranties, Indemnities
Sub-licensing
Jurisdiction ◄