A business’s intellectual property, like its copyrights, trademarks and patents are often some of its most valuable assets. However, sometimes, monetizing those California assets outside of their direct business can prove lucrative by licensing those intellectual property rights. By their very nature and complexity, businesses looking to license must navigate a complicated legal landscape to protect themselves.
What can be licensed?
All forms of intellectual property can be licensed although the way each is licensed can vary. For example, a business, like Marriott, could license its name and trademark for other hotels to use. This allows them to make money off their name without actually operating any additional hotel rooms or expending any money.
For Los Angeles, California, technology companies, like Apple, they could license their patents on mechanical devices to other competing companies, like IBM or Microsoft, or noncompeting companies, like a medical device company. Similarly, copyright licensing is used for artwork, photographs, software, etc., and can allow other companies to utilize those copyrights.
License = contract
Licensing law is essentially California contract law. This means utilizing effective contract drafting strategies with an eye toward the potential legal pitfalls of intellectual property licensing. This also means that both parties will need to do their own due diligence.
For the licensee, this means ensuring that the licensor (the one who owns the intellectual property) actually owns and has the right to license the IP. For the licensor, they need to vet the company to ensure they do not have a history of violating licensing agreements, among other considerations.
Of course, everything should be in writing and written in such a way that an independent, neutral, third party can understand the rights and responsibilities of both parties. The goal is not to litigate later, but to help both parties thrive.
First, consider the costs. There can be an ongoing royalty or recurring fee, or it can be a lump sum contract (a one-time fee). Next, is the term. In other words, how long will the license be active/renewed. Third is where will the license be applicable?
Is it just a regional license, or is it a nation or international license? Fourth, is the type of license (i.e., nonexclusive or exclusive). The next consideration is the right granted by the license, including the ability to assign those rights, distributions, reproductions, adaptations, etc.
The final considerations relate to potential disagreements or litigation, including indemnification, governing laws, dispute resolution models (arbitration, mediation, etc.), penalties, etc.