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Strategies for intellectual property licensing

On Behalf of | Jun 3, 2022 | IP and Technology

Successful businesses have a “secret sauce” that makes them unique in their industry and brings them prosperity. And, while these businesses would never want to give up or mess with that sauce, they likely have an intellectual property portfolio that is valuable. Indeed, nearly every successful brand has valuable intellectual property that can be licensed to pull in passive income, in addition to the brand’s normal Maryland business operations.

Determining if intellectual property licensing is right for you

The idea of additional passive income for any business owner is enticing, but just like any other business decision, every business owner needs to determine if intellectual property licensing is right for them. First, with the help of an expert, determine the scope of your intellectual property portfolio. It includes your Baltimore, Maryland, trademarks, copyrights, patents, software, etc.

Think about those items that could be licensed without hurting your business. For example, if your business owns software that allows other applications to function, licensing that software could bring in substantial funds without you continuing research and developing new programs. You could even license your brand name to other businesses, like Hilton allowing private hotels to use their brand. Of course, there are potential downsides, like Hilton licensing their brand to bad hotel owners, which could hurt their brand image.

License structuring

In consultation with your Baltimore, Maryland, business licensing expert, if you decide that intellectual property licensing is right for your business, the next step is deciding the scope of that license and how to structure it. Think about the type of license. Will it be exclusive, non-exclusive and will the licensee have assignment rights? In other words, can they resell the license you granted? Think about the rights associated with that license as well, like whether the licensee can reproduce it, distribute it, modify it or make other types of adaptions.

This can become very important if you limit licenses to territories, and one of your licensees is attempting to buy up other territories that you did not authorize. Or, where a competing business buys the licenses to adapt or modify code to directly compete with your business. Always consider worst-case scenarios where the licensee is actively trying to compete with you, expand past what you originally wanted or how your competitors could use the license against you.

Do not forget dispute resolution and penalties

After you decide the license term (indefinite, annual, quarterly, etc.) and cost (royalty, lump sum, etc.), do not forget to build in a dispute resolution process and penalties for violating the license. There should be infringement and indemnification provisions. In addition, the governing laws section should use the state that is best for the transaction, including the dispute resolution process (i.e., Maryland litigation versus arbitration).