World Intellectual Property Organization

Licensing of Intellectual Property Rights; a Vital Component of the Business Strategy of Your SME

You may be interested in starting a new business, expanding an existing business (extending your territory or the nature of business) or improving the quality of the goods or services of your SME and thereby its market position. In many situations, licensing of intellectual property rights is an effective tool for achieving these business goals.

A licensing agreement is a partnership between an intellectual property rights owner (licensor) and another who is authorized to use such rights (licensee) in exchange for an agreed payment (fee or royalty). A variety of such licensing agreements are available, which may be broadly categorized as follows:

  • Technology License Agreement
  • Trademark Licensing and Franchising Agreement
  • Copyright License Agreement

In practice, all or some of these agreements often form part of one single contract since in transfers of this nature many rights are involved and not simply one type of intellectual property right. You may also come across licensing agreements in other circumstances, such as, during a merger or acquisition, or in the course of negotiating a joint venture.

All of these mechanisms either on their own or in combination will provide your SME, as a licensor or licensee, a wide variety of possibilities in conducting business in your own country or elsewhere. As an intellectual property owner and a licensor, your SME can expand its business to the frontiers of your partners' business and ensure a steady stream of additional income. As a licensee, your SME can manufacture, sell, import, export, distribute and market various goods or services which it may be prevented from doing otherwise.

In the international context, a formal licensing agreement is possible only if the intellectual property right you wish to license is also protected in the other country or countries of interest to you. If your intellectual property is not protected in such other country or countries then you would not only not be able to license it, but also you would have no legal right to put any restriction on its use by anyone else. 

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