Guide

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:

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 that 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 the licence agreement lasts, who can terminate the agreement and what the grounds for termination are
  • what indemnities each party is required to provide
  • what insurance each party to the agreement is required to carry

GOV.UK provide further information on licensing intellectual property.