Daniel Lo

So, you have just obtained a patent for that new invention – the best thing since sliced bread – or you have registered a trade mark which will help you to establish the next household brand. Maybe you have a registered design that is just out-of-this-world, or maybe you have developed a drought-resistant strain for that exotic rainforest lily. Perhaps you have written the next best-seller. How, then, do you turn that valuable but intangible intellectual property into something a little more…”useful”?

One option, of course, is to sell your intellectual property rights to the highest bidder. But this option may not always be appropriate, say if:

(a)    you or your investor wanted you to remain involved in the development or commercialisation process;

(b)    you wanted to monitor the use of your intellectual property rights (particularly in the case of trade marks or copyright);

(c)    you wanted some continuing income in the form of royalties (which are rarely paid where intellectual property rights are sold or bought outright);

(d)    you want to retain your intellectual property rights for further development or in case another investor offers you a better deal for your rights; or

(e)    your investor is unwilling to purchase your intellectual property rights. (The reasons for this unwillingness can be numerous, but it is usually because your intellectual property rights deals with subject matter that is largely unproven commercially).

An alternative option is to license your intellectual property rights. Generally speaking, the main attraction of licensing your licensing intellectual property rights is that you, as the licensor, get to remain the owner of your intellectual property rights. This allows you to maintain control over the development and exploitation of your intellectual property rights. Licensing your intellectual property rights may also be more appropriate than selling them, particularly where you want to remain involved in the development and/or exploitation of your intellectual property rights, or your investors need you around to interpret the subject matter of your intellectual property rights (particularly if the subject matter is an invention in a highly specialised field of application).

For investors, licensing intellectual property rights often makes more sense over purchasing the rights outright. In particular, where the subject matter of the intellectual property rights is complex or highly specialised, it is often better to have the creator of the intellectual property rights on hand to answer any questions one might have about the complex or specialised subject matter. From the other end of the process, investors will also appreciate the intellectual property rights owner sharing some of the risk of commercialisation through licensing. Because ownership of the intellectual property rights remains with the licensor, investors are not taking on the whole risk that the subject matter of those rights infringes someone else’s intellectual property rights, as this is ultimately the risk of the owner.

Licensing your intellectual property rights also provides you with greater flexibility over the manner in which you can exploit your intellectual property. A license of intellectual property rights may be:

(a)    exclusive or non-exclusive, meaning that you have the option of licensing your intellectual property rights to several interested parties;

(b)    limited in time (eg. six months, one year or ten years), space (eg. you may license your novel for publication within Australia only, or worldwide) scope (eg. you may license your invention for medical use only, as opposed to general commercial use);

(c)    conditional upon certain performance criteria (such as the achievement of minimum sales targets, for example); and

(d)    royalty-bearing or royalty-free. Royalties and license fees are but one aspect of negotiations, whereas in a sale, price is often the only issue that is likely to be considered between the parties in detail.