Commercializing Your Innovations and Business through Licensing

What is a license?

In intellectual property, licensing is a written agreement in which the intellectual property owner (licensor) grants another party (licensee) the right or permission to make, use, sell, import/export, or otherwise exploit technology, information, trademarks or trade dress, copyrights, or other forms of proprietary information.

Why is a license important?

Licenses are important for a laundry-list of reasons. For example, an inventor or innovator that has limited personal capital and no reasonable access to sources of external capital may only have the leverage of technology to attract a business relationship or deal. Similarly, an existing business may find an outside-party's intellectual property interesting as a product enhancement or product line expansion, and to avoid the costs of designing-around and/or risking threats of IP infringement, the existing business may want to strike a deal with such an IP owner.

What type of fees can a licensor expect to earn?

Since every element of a license may be negotiable, a license may take on a variety of forms. This includes lump sum payments (single, periodic, or milestone-driven), royalty fees based on a percentage of gross or net revenues, profits, or other basis, and blends of lump sum payments and royalties. There are no set standards, but statistically, the average royalty percentage falls between 3-10% in most industries.