PROS AND CONS OF LICENSING

LICENSE• License means a right or an authorization given by

the owner of an Intellectual Property(IP) to someone else to use its IP, which would without license would be unlawful.

• The rights under a license are usually granted for specific purpose, under certain agreed terms and

conditions.• Person or entity granting the license is known as

LICENSOR.• Receiver or user of the license is known as

LICENSEE.

PatentsTrademarksCopyrights

Industrial design

LICENSED

THE LIFE CYCLE OF AN INVENTION

Raw ideaDomestic

patent app. filed

Product viability

established

Preliminary

Market analysis

Domestic patent granted

Foreign patent filed

Invention Marketed commercially

License the IP

KEY COMPONENTS OF LICENSE AGREEMENT

• Exclusivity• Territory• Market• Royalty Payment Terms• Guaranteed Annual Minimum Royalty• Termination

LICENSING V/S ASSIGNMENT

LICENSING• Owner retains it

ownership rights of the IP

• License is revocable

ASSIGNMENT• Assignment means sale

• Assignment is not revocable.

Licensing = Rent

ASSIGNMENT = SOLD

Advantages of licensing• Revenue generation• Jose Vidal Martina is a living proof that

innovation is not just the domain of major companies or developed countries.

• Earlier used to depend on expensive ultrasound machines.

• 1st drill bit made of diamond.• His intention was to develop a drill bit that:• could be used in a standard electric drill;• did not require special lubricants;• could be used on the jobsite away from the

user's shop or plant;• formed a smooth hole that did not need to

be polished after drilling; and• was cost efficient.

• Licensing • The popularity of the JVM drill bit led Mr. Vidal

to decide on increasing the manufacture of the product.

• Business Results• The cost-efficiency and convenience of the JVM

drill bits have resulted in significant business success for Mr. Vidal. Patenting allows him to commercialize the product directly as well as earn royalties from licensing the invention.

• Success based on IP Protection and Licensing

• The benefits of any invention depend upon its proper utilization. Instead of locking up his invention out of concern about other people copying his products, Mr. Vidal’s success is based on his smart decision to seek protection of his invention through patenting and then generate profits from it through licensing.

• Company A Company B

(No resources ( No R&D) to commercialize)

• Risk minimization.• Reduction in cost.• Immediate access to new technologies.• Broad field of contacts.• Competitive advantage.• Access to new markets.• Collaboration opportunities.• Retain control of IP.

DISADVANTAGES OF LICENSING

• An IP license may add a layer of expense to a product.

• A License agreement can be disadvantageous when the product or technology is not complete . In such a case licensor may be expected to continue development work at great expense to

satisfy licensee.

• It is absolutely key to the success of the license for it to be properly negotiated and drafted. Licensing can be a complex arrangement and it is important for a licensor to be properly guided in terms of royalty payments, audit provisions and minimum sales.