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PROS AND CONS OF LICENSING
LICENSE• License means a right or an authorization given by
the owner of an Intellectual Property(IP) to someone else to use its IP, which would without license would be unlawful.
• The rights under a license are usually granted for specific purpose, under certain agreed terms and
conditions.• Person or entity granting the license is known as
LICENSOR.• Receiver or user of the license is known as
LICENSEE.
PatentsTrademarksCopyrights
Industrial design
LICENSED
THE LIFE CYCLE OF AN INVENTION
Raw ideaDomestic
patent app. filed
Product viability
established
Preliminary
Market analysis
Domestic patent granted
Foreign patent filed
Invention Marketed commercially
License the IP
KEY COMPONENTS OF LICENSE AGREEMENT
• Exclusivity• Territory• Market• Royalty Payment Terms• Guaranteed Annual Minimum Royalty• Termination
LICENSING V/S ASSIGNMENT
LICENSING• Owner retains it
ownership rights of the IP
• License is revocable
ASSIGNMENT• Assignment means sale
• Assignment is not revocable.
Licensing = Rent
ASSIGNMENT = SOLD
Advantages of licensing• Revenue generation• Jose Vidal Martina is a living proof that
innovation is not just the domain of major companies or developed countries.
• Earlier used to depend on expensive ultrasound machines.
• 1st drill bit made of diamond.• His intention was to develop a drill bit that:• could be used in a standard electric drill;• did not require special lubricants;• could be used on the jobsite away from the
user's shop or plant;• formed a smooth hole that did not need to
be polished after drilling; and• was cost efficient.
• Licensing • The popularity of the JVM drill bit led Mr. Vidal
to decide on increasing the manufacture of the product.
• Business Results• The cost-efficiency and convenience of the JVM
drill bits have resulted in significant business success for Mr. Vidal. Patenting allows him to commercialize the product directly as well as earn royalties from licensing the invention.
• Success based on IP Protection and Licensing
• The benefits of any invention depend upon its proper utilization. Instead of locking up his invention out of concern about other people copying his products, Mr. Vidal’s success is based on his smart decision to seek protection of his invention through patenting and then generate profits from it through licensing.
• Company A Company B
(No resources ( No R&D) to commercialize)
• Risk minimization.• Reduction in cost.• Immediate access to new technologies.• Broad field of contacts.• Competitive advantage.• Access to new markets.• Collaboration opportunities.• Retain control of IP.
DISADVANTAGES OF LICENSING
• An IP license may add a layer of expense to a product.
• A License agreement can be disadvantageous when the product or technology is not complete . In such a case licensor may be expected to continue development work at great expense to
satisfy licensee.
• It is absolutely key to the success of the license for it to be properly negotiated and drafted. Licensing can be a complex arrangement and it is important for a licensor to be properly guided in terms of royalty payments, audit provisions and minimum sales.
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