Wed 11th Mar 2020
Nine key benefits of licensing intellectual property for the licensor
Sectors: AI and data science, Brand owners, Chemistry, Cleantech and renewables, Electronics and telecoms, Fashion, Finance and insurance, Food and drink, Life sciences and health, Materials science, Mechanical engineering, Software
Finding and entering new markets is key to the growth of any business, whether this is selling to a new industry sector or into a foreign territory. But this can be time-consuming and labour intensive and difficult to do well if you do not have anyone who speaks the language, understands the sector or is familiar with differences in the cultural or regulatory environment.
This is why some businesses with strong intellectual property (IP) will pursue a strategy of licensing their products or IP to other companies in their target markets and thereby take advantage of established routes to market.
Licensing is not the only option, but it does have a number of advantages which are outlined below:
A new source of revenues - You can license any of your intellectual property, such a trade mark, a brand character, a patent or design and will earn royalties from the licensee.
Save money - You will avoid the capital costs of establishing a manufacturing plant, distribution costs will be lower, and you will save on the promotional and retail costs which will be incurred by the licensee in their territory.
Enter new countries - You will be able to penetrate new markets in new countries where the licensee operates, this is particularly important in countries where there are restrictions on the activities of foreign companies or import tariffs.
Extend your brand across new products – for example, one of the world’s leading motorcycle companies licenses its brand to a manufacturer of sunglasses.
Beat competitors - This is a quicker route to market than trying to establish your own channels, so will enable you to steal a march on your competitors (unless they are also looking at licensing).
Reduces risk - There is less chance of failure with a licensee who has an established business and already successful marketing and sales channels. Even if a venture does fail, your costs are much lower than if you had premises and employees to manage.
Speed to market - You will not need to find distributors and retail outlets or employ sales teams and can benefit from the licensee’s established contacts to distribute your goods successfully.
Gain expertise - In a mutually beneficial working relationship, you will also learn from the licensee and may spot new opportunities for developments appropriate to their market.
You retain ownership of your intellectual property – and you determine how the licensee can benefit from it.
While the best licensing agreements can be profitable and mutually satisfying for both participants, as with any joint venture there are also risks. It is important to ensure that you seek advice from experienced intellectually property experts.
You will need a well-drafted licensing agreement which protects your interest, and the commercial relationship will need to be monitored and managed.
How we can help
Page White and Farrer provides advice and consultancy on all aspects on IP licensing, including:
- searching for IP rights relevant to licensing discussions;
- checking the status of IP rights and advising on strengths and weaknesses;
- negotiating and advising on new IP licensing agreements;
- advising on the terms of existing licence agreements; and
- registering licence agreements.
This briefing is for general information purposes only and should not be used as a substitute for legal advice relating to your particular circumstances. We can discuss specific issues and facts on an individual basis. Please note that the law may have changed since the day this was first published in March 2020.