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.
LICENSED
 THE LIFE CYCLE OF AN
INVENTION
Domestic Prelimina
Product
Raw idea patent app. ry
viability
filed Market
established
analysis

License the Invention

Marketed Foreign Domestic
IP patent filed patent
commerciall
y granted
 KEY COMPONENTS OF LICENSE
AGREEMENT

• Exclusivity
• Territory
• Market
• Royalty Payment Terms
• Guaranteed Annual Minimum Royalty
• Termination
 LICENSING V/S ASSIGNMENT
LICENSING ASSIGNMENT
• Owner retains it • Assignment means sale
ownership rights of the IP

• License is revocable • 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.