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29 January 2016

Turning Intellectual Property Into Cash

There are two main ways in which intellectual property (IP) can be used to generate an income; licensing and assigning.

Whether you are concerned about exploiting your own IP or are considering using someone else IP within your business, you need to understand, before entering into a deal, which method is being used.

1.  Licence Agreement

A licence would be appropriate where the creator of the IP is willing to let a third party use their IP to generate an income and the IP creator wishes to do this without losing their own rights to use the IP or the right to permit others to use the IP as well.

An example of this would be home furnishings company wanting to produce a range of products featuring a famous photograph. The home furnishings company will need to approach the owner of the copyright in the photograph, often the original photographer or a stock photo agency, and ask permission to use the photograph on the products.

In a licensing arrangement, the home furnishings company and the copyright owner will come to an agreement under which the home furnishings company is granted permission to use the photograph on the product range in return for payment. This can be either a fixed fee or a percentage of any products sold, in which case the payment is known as a royalty.

Any such agreement should be drafted clearly and concisely. It should particularly be clear how long the agreement will last, what payments will be due and the territory which is covered. It should always set out whether the person using the IP has the exclusive right to use the IP in any geographical region or specific market place or whether others will also be able to use it.

To illustrate this point, and continuing the with above example, consider the scenario where the home furnishing company, who has licensed, the photograph wishes to distribute the products across the whole of Europe; but licence agreement only covers use in the UK. Distribution outside of the UK would be a breach of contract. Equally, the home furnishings company may want to be the only company whatsoever which has the right to use the photograph in question, whereas the IP owner might want to allow the home furnishings company to use the photograph on their product range and allow another company to use the same photograph on stationary.

2.  Assignment

In the scenario above, if the IP owner were to assign the IP in the photograph to the home furnishings company, the IP owner would no longer have any rights in relation to the photograph and would have no ability to control how or where the photograph was used.

An IP owner will often receive a fixed sum as payment for an assignment, although in some circumstances, royalties may also be appropriate.

An assignment is almost always more attractive to the person looking to use the IP, although the IP owner maybe hesitant to agree to it.

Once the IP has been assigned the new owner of the IP, they will be able to use the IP as they see fit.

Before entering into an assignment, the person hoping to become the new IP owner should make enquiries as to any pre-existing licence arrangements entered into by the current IP owner and ask the current IP owner for proof that they do in fact own all the IP they are trying to assign to the new IP owner.

For advice on this subject please contact Richard Bailey or another member of the company commercial team at commercial@steeleslaw.co.uk or on 01603 598000.

 

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