How Intellectual Property Licensing Works and Related terms

How Intellectual Property Licensing Works and Related terms

Date: October 02, 2007

Intellectual property rights are plainly assets. They have value, and they can be bought or sold. There are some differences, however, when comparing IPR to other types of assets. If you are a solicitor that does not regularly deal with IPR, you will usually try to find precedents or earlier files that give you some guidance. Often, these precedents deal with hard assets; a reliance on these can be dangerous for a few reasons.

First, intellectual property rights do not have to be sold. Indeed, a purchase and sale of IPR is somewhat uncommon, because licenses are often used. The hard asset mind set becomes dangerous when you look at the deal only as a sale or potential sale. If your client asks you to transfer rights, you must not lose sight of the fact that a sale/assignment is the only option. It would be like someone coming to you looking for office space. In that case, you would not only discuss the possibility of buying a building, but you would probably also consider leasing.

Licensing IPR can be analogous to leasing, except that more than one person can license the same property.

Secondly, you will never get the same level of comfort when buying IPR as you will when purchasing hard assets. In a hard asset sale, the mere fact that the vendor has possession of the goods gives you some comfort. With abstract property like IPR, it is much easier to pass on (fraudulently or otherwise) a non-existent title. The problem is exacerbated because of the abstract nature of the property; there is no registry you can search to be 100% sure the vendor can properly sell the asset.

Further, think about what happens when there is a sale of know-how. To say that you are buying the asset is based on “old” property law and is not truly accurate. In fact you are buying a copy of the asset. The vendor will informally retain most of the information and there is nothing that can be done about it (short of extricating the brains of all people who have pertinent knowledge). In order to prevent unwanted competition in the future, you have to include special contractual terms and restrictions that are unheard of in hard asset transactions.