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).
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
Trademark Licensing /Franchising
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
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
iii) Third Parties
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?