Use intellectual property to grow your business
Licensing your intellectual property
If you own intellectual property (IP), but lack the desire or the resources to bring it to market, you can license it out to other businesses.
By granting an IP licence, you allow the licence holder to use your IP, manufacture, distribute or sell products and services based on your intellectual creation. In return, they pay you royalties - either as a percentage of the income they generate from your IP, or as a fixed or variable fee.
You can license all types of IP, including:
- patents - see how to license a patent
- designs - see how to license your designs
- trade marks - see how to license your trade marks
- copyright - see how to license your copyright
Types of intellectual property licence
There are a number of different types of IP licences that you can grant:
Non-exclusive licences
You can grant these to as many people and businesses as you like. However, a large number of non-exclusive licence holders can be difficult to manage and you will typically earn lower royalties.
Exclusive licence
This gives the licensee exclusive rights to exploit your IP. You give up all rights over your creation, however, this will typically earn you higher royalties.
Sole licence
This is similar to an exclusive licence, but you retain the right to use your intellectual property yourself. Sole licences can be safer than exclusive licences as you are not completely reliant on a licensee. However, royalties are often lower.
Whichever licence you grant, you need to make sure that you appoint licensees who will maximise the potential of your IP. You should appoint people who have the skills and resources to manufacture the products and the distribution network to get those goods to the market. The potential licensee should have a good reputation and track record - you will want someone who won't risk damaging your business or product brand.
Terms of IP licensing agreements
Before you grant a license to another business to use your IP, you should discuss and agree:
- how you will calculate the fees and royalties and when they will be paid
- what you allow the licensee to do (eg manufacturing, distribution)
- if you allow any sub-contracting
- the territories the agreement covers
- how long does the licence agreement last, who can terminate the agreement and what are the grounds for termination
- what indemnities each party is required to provide
- what insurance each party to the agreement is required to carry
GOV.UK provides further information on licensing intellectual property.
The new UK National Security and Investment Act 2021 came into effect fully on 4 January 2022. Businesses and investors should check the guidance to understand what types of acquisitions are covered by the new rules.