Unit 4: Licensing
Intellectual Property Right and EDP notes · PTU syllabus (BSTD 602-20)
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Unit summary
Licensing lets owners earn from their IP without selling it. This unit covers the practical aspects of licensing — benefits, determinative factors and important clauses.
After this unit you can
- Distinguish licensing from assignment
- Explain the benefits of licensing
- Identify factors in licensing decisions
- Draft important licence clauses
PTU syllabus topics
- Practical aspects of licensing — benefits
- determinative factors
- important clauses
Scope
What is licensed
Territory
Where
Duration
How long
Royalty
How much
Quality control
Standards to protect the brand
Topic 1
Licensing basics
Ownership
Transferred
Retained by the owner
Rights
Full or part transferred permanently
Permission to use on agreed terms
Payment
Lump sum or royalty
Royalties, fees, minimum guarantees
- Exclusive
- Only the licensee may use (not even the owner)
- Sole
- Licensee and owner may use
- Non-exclusive
- Many licensees
- Compulsory
- Granted by government (patents not worked, public need)
- Cross-licence
- Parties license to each other
- Franchise and brand licensing
- Use of brand and system — character prints on apparel
Topic 2
Benefits of licensing
- Licensor: income without investment, entry into new markets, brand extension, enforcement help. Licensee: access to technology or brand, faster market entry, lower R&D cost.
Example
A fashion designer licenses her print collection to a home-furnishings company for 5% royalty on sales, while keeping ownership.
Topic 3
Determinative factors
- Strength and validity of the IP
- Registered and enforceable rights
- Market potential
- Size and growth
- Licensee capability
- Quality, distribution, reputation
- Territory and exclusivity
- Where and to whom
- Financial terms
- Royalty rate, minimum guarantee
- Control
- Quality standards and approvals
- Legal and tax rules
- Registration, withholding tax, foreign exchange
Topic 4
Important clauses
- Grant and scope
- Rights, products, field of use
- Territory and term
- Geography and duration, renewal
- Exclusivity
- Exclusive, sole or non-exclusive
- Royalties and payments
- Rate, base, minimum guarantee, audits
- Quality control
- Samples, approvals — essential for trademarks
- Improvements
- Who owns improvements
- Confidentiality
- Protect know-how
- Infringement and enforcement
- Who sues third parties
- Warranties and indemnities
- Validity, liability
- Termination
- Breach, insolvency, post-termination sell-off
- Dispute resolution and governing law
- Arbitration, courts
Key terms
- Licence
- Permission to use IP while ownership stays with the owner
- Exclusive licence
- Licence excluding everyone else, including the owner
- Royalty
- Payment based on use or sales
- Minimum guarantee
- Assured minimum royalty
- Quality control clause
- Licensor's right to approve quality
Quick revision
- Assignment vs licence; exclusive, sole, non-exclusive, compulsory, cross, brand licensing.
- Benefits to licensor and licensee.
- Determinative factors.
- Key clauses.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Distinguish assignment and licence.
- Q2.What is an exclusive licence?
- Q3.State two benefits of licensing for the licensor.
- Q4.What is a minimum guarantee?
- Q5.Why is a quality control clause important for trademark licences?
- Q6.Name three important licence clauses.
Long-answer questions
- Q1.Explain licensing and its benefits.
- Q2.Explain the factors and clauses in a licensing agreement.
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