In this module, we'll focus on an aspect of IP strategy that is critically important for a company, IP licensing. IP can be licensed to another party (out-licensing) or your company may obtain rights to third party IP (in-licensing). Licensing is driven by the needs of your business, which could be commercialization of your IP for revenue and growth, acquisition of assets for a start-up company or for managing legal risks around your product or service. These specific scenarios are covered in more detail below. At the end of this module, you should be able to:
Out-Licensing IP and Enforcing IP Rights
Licensing is a common mechanism for extracting value from your IP, which are described in the resources below. Commercializing your IP can be passive approach whereby third parties approach your company to license your IP or it may require an active or offensive approach possibly requiring legal action or through other means such as licensing or partnering.
In-Licensing IP for Acquiring Assets and Freedom-to-Operate
Many start-up companies are founded based on in-licensing of IP around a specific technology. Many technologies and associated IP created at universities are licensed to entrepreneurs as the basis for forming a start-up company. These licenses typically represent the companies first and only assets. Formulating a business and IP strategy around the in-licensed IP is therefore critical. Part of the IP strategy should also include assessing if third party IP will be required to commercialize your proposed product or service (freedom-to-operate analysis). Identifying third party IP can significantly impact the development of your product or service and your business model. One way of addressing third party IP is to in-license the required IP.
Anatomy of a License and Related Agreements
In the topics above, we discussed situations where a business can out-license their IP to generate value or in-license IP to avoid infringement. Another common IP licensing scenario is the in-licensing of a company's first or primary assets (e.g. in-licensing of IP from a University). In all of these cases you'll need to negotiate the terms of the license agreement.
Negotiations are best handled with legal representation but there are specific terms in these agreements that only a business can decide to accept or reject and can directly impact the company's business and IP strategy. Provided below are agreement templates for licensing, options and term sheets.
License/Option Agreement
Term Sheet