License

A license or licence in the sphere of Intellectual Property Rights (IPR) is a document, contract or agreement giving permission or the 'right' to a legally-definable entity to do something (such as manufacture a product or to use a service), or to apply something (such as a trademark), with the objective of achieving commercial gain. Typically, the party giving the permission is referred to as the 'licensor' and the party receiving the licence as the 'licencee' or 'licensee'. To be able to license a right, the licensor must have legal title or 'proprietary right' to it. The licensor typically offers the license with specific limitations, such as the period of use, the territory of use, etc. Both the licensor and the licensee have specific obligations which is expressed in the body of the agreement or is expressed in the law of the country or region or an international covenant which governs the performance of the agreement.

In law, the document is the evidence of a licence to be distinguished from the underlying licence which is the actual permission to an act in a way that would be otherwise unlawful. Originally in reference to property, a licence was the right of an individual to enter upon the property of another to do an act that would have otherwise been considered illegal as a trespass, such as walking in the woods, hunting game or swimming in the lake. To be distinguished from a licence coupled with an interest which is an irrevocable licence that granted some interest in land or in a chattel. Such a licence could be enforced with an injunction. Licences can be gratuitous, revokable at will (sometimes called a bare license) or a type of bailment.

Occupational

Licensing (or Registration) is required of a number of occupations and professions where maintenance of standards is required to protect public safety, for example physicians, psychologists, electricians are licensed in many countries.

Copyright, patent, and trademark

The holder of certain rights such as a copyright, trademark, or patent may (and often does) require that a licence be accepted as a condition of being allowed to use, reproduce, or create an instance of the licensed work.

The person who purchases a book owns the atoms and the right to resell or lend, but not the copyright to the text. In the United States this right to resell is part of the first-sale doctrine.

Although they are often subsumed under the rubric of "intellectual property", the laws of copyright, patent, and trademark differ widely in what may be required to be licensed. For instance, copyright over a piece of software code requires a licence to distribute copies of that code (or a derivative work thereof); however, a software patent requires a licence to implement the patented algorithm, even if it is independently rediscovered. Licensing the name of the software (for example, for t-shirts bearing the name or characters in a game) requires a different agreement. The nuances become complex with trademark licensing in general. For example, a toy company can license the name Star Wars and the characters in the film, but would need a separate agreement to use the likenesses of the principal actors.

Copyright licenses in software

Computer users may think of licenses as in reference to end user licence agreements (EULA), which are claimed by vendors to encumber the user with extra restrictions besides the copyright, as a condition of granting permission under copyright law to use the work. However, an EULA generally purports to create a contract, not merely to grant a license.

Software licenses are often highly restrictive, and most software users do not read them in full. So-called "shrink-wrap" licenses and "click-through" licenses are common. Most limit the number of computers the software can be installed on, the number of users that can use the software, and apply other limitations that are not inherent in the technology. As a result, huge fortunes have been made by selling goods that have a minimal cost of reproduction on a per-item basis.

In the United States, the first-sale doctrine, Softman v. Adobe [1] and Novell, Inc. v. CPU Distrib., Inc. rule that software sales are purchases, not licenses, and resale, including unbundling, is lawful regardless of a contractual prohibition.

Free software licenses and open source licenses are a reaction to what many see as the unfair restrictions of proprietary software licenses.

Trademark and brand licensing

While movie and entertainment licensing receive the most press coverage, and have the largest displays at the annual Licensing Show in New York, the most revenues in trademark licensing come from the use of brand names to sell products other than those made by the brand itself. Companies such as Coca-Cola earn large sums of money from products bearing their icons and trademarks, and Harley-Davidson even derives more of its income from licensing than from the sale of its motorcycles. Reasons why a licensee would negotiate a license include the expense of starting a new brand from scratch and the crowded retail marketplace, where even many established brand names have failed or been dropped by their owners. It's cheaper to pay a licensor a fee for using the brand, especially if consumers believe the product was made by the licensor: Breyer's yogurt is not made by the parent company, Good Humor-Breyer's (a division of Unilever), but is manufactured under license by Kraft Foods.

Character licensing

Character licensing is now dominated by the movie studios and entertainment packagers (for example, Cartoon Network. Only the most-powerful character creators are able to retain the licensing rights to their creations. Usually getting them in films or on TV requires allowing the distributor, studio or broadcaster to negotiate licensing fees (and retain a portion thereof). Larger companies with properties that have a proven track record of success can guarantee up-front payments (the "guarantee", in licensing terms) of thousands or even millions of dollars from licensees before products are even manufactured or sold to the public (examples: Looney Tunes by Warner Bros., Harry Potter, Mickey Mouse from Disney, etc.).

Artwork licensing

In recent years, artwork has become a commodity sold by a handful of large companies such as Art Impressions and Wild Apple Graphics, with the result only a few artists such as Christian Riese Lassen and Mary Engelbreit are able to rise above the crowd and establish reputations on their own.

Academia

A book published in the U.S. and its licensed Chinese reprint (for sale in Mainland China only)

A licence is an academic degree in many European universities which is approximately equivalent to a master's degree. Originally, in order to teach at a university, one needed this degree which, according to its title, gave the bearer a license to teach. The name survived despite the fact that nowadays doctorate is typically needed in order to teach at a university. A person who holds a licence is called a licentiate. Currently, a licence is a middle-level degree between a master's degree and a doctorate.

In some countries, i.e. Poland, a licence is achieved before the master's degree (it takes 3 years of studies to become licentiate and additional 2 years to become master).

Licensing

Licensing is a form of strategic alliance which involves the sale of a right to use certain proprietary knowledge in a defined way. The intellectual property may be registered publicly, for example in the form of a patent or trademark, as a means of establishing ownership rights. Or, it may be retained within the firm: referred to as know-how, it is commonly based on operational experience.

Know-how for licensing purposes may include commercial and administrative knowledge, as well as technical knowledge. The licensing agreement is a legal contract setting out what is to be transferred from licensor (the owner of the intellectual property) to licensee (the entity purchasing the use rights for that intellectual property), including conditions of use.

A license commonly has several component parts, including a term, territory, advance, royalty rate, guarantee, renewal, as well as other protections deemed vital either to the licensor or the licensee.

Money: the licensee often is required to make a lump sum (front end) payment called an "advance against royalties" or simply an "advance." Additionally there is normally a royalty rate which tends to vary enormously, depending on the industry and product. A minimum performance (payment) clause (often referred to as the "guarantee") is considered essential, and is paid at the back end of the "term" (the length of the contract). The guarantee, as the name implies, makes sure the licensee compensates the licensor for under-performing sales, thus protecting the licensor from having their intellectual property trifled with.

Term: most licenses are for a particular length of time. This protects the licensor should the value of the license increase, market conditions change, or the licensee perform below expectations. In some cases, the license can be renewed, often if the licensee reaches certain performance threshholds agreed to by both parties.

Territory: a contract almost always stipulates what territory the rights pertain to. For example, a license with a territory limited to "North America" would be forbidden from using the rights granted in Europe, Asia or S. America.

There are also some companies that agree on a cross-licensing deal, whereby they just swap licenses instead of paying. A close relative of this kind of licensing is a "strategic alliance" whereby companies use each other's trademarks to promote their products without any exchange of monies.

According to UNCTAD, flows of royalties and licence fee receipts amounted to US$ 72 billion in 2001. According to the Licensing Industry Merchandiser's Association (LIMA), the sales from non-patent licensing surpassed $85 billion in 2005.

Technology licensing is often used where there is a barrier to trade or constraints on and risk in foreign investment. Licensing can serve as a Trojan Horse in the meaning that it opens the possibility for a company to enter a foreign market where it otherwise might have been forbidden. One problem with licensing is that it can create a potential competitor, and so it's often seen as a last-resort strategic alliance when other options are not available.

External links

* Industry Merchandiser's Association
* Broad Street Licensing Group (useful information about licensing from a licensing agency)
* Danish local government rebels against MS license terms
* Licensing Act 2003 - England & Wales
* Technology Licensing Practices in France by Christian Bessy and Eric Brousseau - survey of patenting and licensing strategies in France

License: Encyclopedia BETA

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