InvestmentsLicensing


Licensing

Definitions

A form of strategic alliance which entails the sale of a right to use certain proprietary knowledge (aka IP) in a defined way.

Licensing – the transfer of rights that are less in degree than a transfer of the entire ownership. E.g, a non-exclusive license to a copyrighted software product results in the licensee obtaining limited rights to use the software, while the licensor retains ownership and the right to license others.

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).

Simply: If you protect your ideas, images, information, names and all forms of IP through patents, copyrights, service marks and trademarks, then you own rights to them. No one else is allowed to use them without your permission. In order for others to use your ideas and concepts (your IP), you need to grant them permission or license, for an agreed upon fee, commission or royalty and under specified terms of use.

What Can Be Licensed?

Either IP that is publicly registered as a means of establishing ownership e.g patents, trademarks or

IP that is retained in the company mostly based on operational experience e.g. know-how. Can be commercial, administrative knowledge or technical knowledge.


Types of Licensing Agreements

Technology Licensing

Trademark Licensing /Franchising

Copyright Licensing

Celebrity Licensing- marketers gain credibility from celebrities to sell their products while the celebrity gains extra streams of revenue. E.g. product endorsements.

Character licensing-e.g. Mickey Mouse, Power Rangers logos to enhance sales of different products.

Reasons for Licensing

Competitive advantage – restricts competitors’ use of proprietary IP. Creates an entry barrier.

As IP owner- business expansion with a steady stream of additional revenue.

As a licensee, you manufacture, sell, import, export, distribute and market various goods or services

Earn income on IP which you had no capacity to fully utilize.

Protects your IP rights.

Entry route into forbidden foreign market

Disadvantages

Loss of control over the property, creating constraints that may compromise the product’s/service’s design

higher cost, both in terms of reduced profit (diverted back to the IP holder) and additional costs (lawyer’s fees)

lower value built into your own company-due to lack of IP assets ownership

May create a potential competitor

Methods of Exploiting Licensing Benefits

Create your own idea, design, product etc e.g. Mickey Mouse from Disney

Licensing as source of extra revenue e.g. Olympic Committee licenses the Olympic logo and collects royalties,

Acquire someone else’ IP– e.g. Bill Gates and DOS program

Exploit others’ omissions. E.g When Econet went into Kenya they discovered that someone had noticed their expansion intention and had registered their name and logo in that nation. He now demanded that they pay for use of his registered tradename. It resulted in legal challenges and costs to Econet.

Savvy businesses accumulate IPR and exploit them through licensing, joint ventures and other revenue-generating transactions.

Ownership of Intellectual Property

i) Employees

ii) Consultants

iii) Third Parties

Due Diligence

Potential Audience: How many “instant customers” do you gain by leveraging this IP?

Lost Audience: How many customers do you lose by leveraging it?

Development Benefits: Do you gain extra benefits, aside from customer base, by using this property?

Quality of Licensor: How is the licensor to work with?  Do they understand the market value of their property?  Do they exert too much control?  Are they disinterested to the point that they won’t help with the product’s development?  Will they license the property to anyone, thus diluting the brand’s quality?

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