Globally, the transfer of technology and licensing agreements are major tools for the development of technology. These two concepts (i.e. transfer of technology and licensing) in practice are interconnected as licensing arrangements are crucial in facilitating the transfer of technology. This is evident in trademarks, copyrights and patents which has facilitated and accelerated the huge transfer of technology and literary works around the globe. Most licensing agreements include intellectual property (IP) components because most of these agreements are driven by reasons for acquiring knowledge and technologies in which case IP components are dominant factors of the licensing agreements. It is from this notion that the term IP licensing is coined. IP licensing is a partnership between an IP rights owner (licensor) and the person who is authorized to use those rights (licensee) in exchange for an agreed payment which could take the form of a fee or royalty. IP licensing agreements are categorized as:
1. Technology licensing: This may be for certain IP rights only. For example, a license to practice an identified patent or to copy and distribute the work of a certain author. Licenses may be acquired for all the IP rights of any kind that are necessary to reproduce, make, use, market and sell products that are protected by patent, copyright, trademark and trade law secret.
2. Trademark licensing: Here, the trademark owner retains ownership and merely agrees to the use of the trademark by one or more other companies. In most circumstances, the licensor retains some degree of control over the licensee to guarantee that a certain quality is maintained. Commonly, trademark owners license third parties to use their trademarks locally in the country where they exercise their own business. Today, the main importance of licensing of trademarks is reflected in the quantum of its use in the global market. Trademark licensing is the means by which foreign companies allow their trademark to be used by a local company (ies).
3. Copyright licensing: In this case, the licensor gives the licensee the authority to make use of his copyright work by way of a copyright license. The subject matter of copyright licensing includes literary works, musical works, dramatic works, choreographic works, pictorial, graphical, and sculptural works, computer games, computer software, motion pictures, sound recordings and architectural works.
In reality, all or some of the types of licensing agreements discussed above may form part of a single contract because in technological transfers of such nature, many rights are involved and not just one IP right. The conditions agreed upon in a license agreement are called the “terms of conditions”. These terms include:
a. The subject matter of the license which would clearly identify the technology to be licensed. For example, is the technology to be used, a formula, specification, protocol, software program, diagram(s) or documentation?
b. The rights that the license gives. That is, what is the scope of the rights? What is the territory (geographic and otherwise)? IP rights are often times territorial, therefore the country or region which the license agreement covers must be clearly stated. Are the rights conferred by the license exclusive or non-exclusive? Exclusive rights simply means that the rights are given to one particular licensee while non-exclusive rights mean that the rights are also conferred on other licensees which means the license is a competitive one.
Exclusive or non-exclusive rights acquired from a license agreement may include the right to:
• Reproduce the technology
• Display it
• Modify it
• Make derivative works from it
• Use it for research and product development
• Manufacture it
• Distribute and sell or even to
• Sub-license it to another person who will be authorized to exercise any of the rights mentioned above
c. Financial terms which will state clearly the financial implications of the licensing agreement. The value of the IP license will be put into consideration. Majorly, there are two types of payment methods that could be used; royalties or lump sum payments. Royalties are assessed based on gross or net value while the lump sum payment can be made at the beginning of the agreement or later.
d. The growth and development of the technology overtime is also another crucial term of any licensing agreement. It is important that the agreement clearly shows whether the licensee will have rights to future versions of the technology or product in question or whether the licensee will have rights to improvements or derivative works.
THE BENEFITS OF LICENSING
The benefits of licensing include among others:
1. Sharing costs and risk – where a company licenses the right to manufacture and sell products, the licensor receives revenues from that licensing but does not take the risk of manufacturing, promoting and selling those products. On the other hand, the licensee has the right to use the IP without the expense and risk of the research and the costs of developing the product.
2. Revenue generation – licensing can broaden the reach of IP into different markets which could either be local or global.
3. Increasing market penetration – an owner of IP may license another business to sell in territories that the owner cannot cover.
4. Reducing costs – a business may ‘buy-in’ innovation to reduce its research and development costs.
5. Saving time – a business may get its products or services to the market more quickly by acquiring a licence to use existing IP, instead of re-inventing the wheel (sometimes referred to as an “engineering workaround”).
6. Accessing expertise – by taking a licence, a business may tap into expertise that it does not have in-house.
7. Obtaining competitive advantage – by acquiring a licence to use IP, a business may obtain an advantage over its competitors.
8. Collaboration – businesses may want to work together to develop new products and services. Whenever you think about taking or granting a licence of any IP, the first step should be to assess the needs and objectives of your business and how licensing might help meet them.
Licensing is extremely important in not just the transfer of technology but it also encourages the growth and development of businesses around the world. This is so because after all has been said and done, the owner of a patent or copyright would ultimately want to profit from his IP and this acts as an incentive in not just the development of IP but businesses around the globe. This is also evident as seen in the fact that the transfer of technology and licensing also are very vital and important factors in international joint ventures in order to maintain a competitive edge in market economies. Ultimately, it is clear that a strong licensing regime engenders the growth of market economies and companies around the world as can be seen in the experiences of American companies like Microsoft, Apple and Google which have benefitted tremendously from a strong IP licensing regime.