Is your business thinking about selling off assets to boost cash flow? Are you sitting on a valuable idea or asset that could be making money, but for whatever reason you don’t have the ability to make the most of it?
Thinking about whether your asset can be licensed in a way that benefits you, and the person gaining the right to use your asset, may be the right step for your business.
What is a licence?
A licence agreement is a contract where a licensor grants to a licensee a right or privilege to use something for a set purpose.
For example, you could licence the rights to sell a product; the rights to use a business asset (plant or equipment); the rights to the know-how to produce a particular product; the use of an area of land or within a building; or the rights to use or commercialise intellectual property (IP), including branding, get-up or trademark/s.
In exchange for the right or privilege licenced from the licensor, the licensee will negotiate and agree to a set of conditions which typically includes paying a royalty or other payment scheme for the licenced use of that right or privilege.
Things to consider when developing a licencing agreement
Licence agreements are all about balance. Both the licensee and licensor are wanting to gain a benefit from the licence arrangement, so it is about making that happen while managing responsibilities around risk, control and realistic performance.
Our IP and commercial lawyers regularly assist clients with licencing arrangements. They recommend considering the following when developing a licencing agreement:
- Licencing agreements should be considered a transaction, and not as a document. A licencing agreement is establishing a long-term relationship, not just a one-off interaction. You need to therefore think about what is in it for you, and for the other party in the long run, as both parties need to benefit for it to work.
- Licence agreements should not be template documents. They need to be tailored to suit the relationship and agreement.
- Licence agreements need to ensure there are balance and address issues like control, allocation of responsibilities, sharing rewards, management of the risk.
If you require our specialised advice concerning any licencing arrangements, contact our Intellectual Property or Commercial and Property lawyers.