Licenses allow an IP owner to split the “bundle” of rights associated with owning a given intellectual property in any of a wide variety of directions. An IP licensor can control which specific IP rights the licensee is permitted to implement, making licensing a very powerful and valuable tool for maximizing the return on that IP.
- For example: The owner of a trade secret might be willing to grant to a “licensee” the right to use that trade secret, but not the right to disclose it to others. This situation is very common when purchasing custom equipment, and in the contract manufacturing, custom software development, and franchising realms, among many others.
- A patent owner might grant a right to make (or possibly have made) implementations of the patented concept, but not the right to use those implementations, or to sell them to anyone other than the patent owner. This scenario is rather typical in contract manufacturing deals.
- The owner of a mark (the “licensor”) might grant a licensee the right to apply the mark to certain products sold by the licensee, provided those products continually meet specific quality standards set by the licensor. How happy would a Happy Meal® be without licensed cartoon characters to spice up the food? Yet how happy would the licensor be if their cartoon characters were associated with contaminated or sub-standard food?
- A copyright holder might grant a license to publish, distribute, or perform a work, but not to create derivative works from it. The Beatles might have licensed Spotify or Apple to distribute their music, but not to create revised versions of, for example, “Hey Jude”, “Let It Be”, or “Strawberry Fields Forever”.
As these examples illustrate, an IP licensor can control which specific IP rights the licensee is permitted to implement.
In essence, licensing offers nearly unlimited flexibility in crafting the terms of a deal. Almost always, terms can be worked out and documented that, from the perspective of each party to the agreement, sufficiently appease that party’s concerns and align with that party’s interests. In a few relatively narrow situations, certain terms of a license might raise antitrust concerns, but nearly always such concerns can be alleviated by thoughtfully restructuring those terms.