License Agreements

The Utility of License Agreements

License Agreements permit one party to use the intellectual property of another party, typically in exchange for a fee. License Agreements are typically used where one party would like to retain ownership rights to the property at issue, but would also like to further exploit the economic value of the property by allowing others to use the property for a fee. This arrangement can be particularly successful in intellectual property, as it often lends itself to multiple non-rivalrous uses.

There are three main types of intellectual property: copyright, patents, and trademarks.

Copyright ownership includes the exclusive right to reproduce, distribute, display, perform, record, and create derivative works of a new creative and original work of authorship. Copyrights are most commonly owned by the author/creator. The major exception to this rule is when works are created in a “work for hire” arrangement, in which the author is employed for the specific purpose of creating works such that the employer owns the fruits of those labors. Common copyrightable works are drawings, photographs, film, sound recordings, music, books, and poetry. Items that do not enjoy copyright protection include those works that have fallen into the public domain due to time, works that are either too simple or basic to enjoy copyright protection such as short phrases or simple symbols, and works created by governmental agencies, among others. Although copyrights enjoy lengthy terms, their scope is often defined narrowly such that works that are merely reminiscent or somewhat similar will not be seen to infringe.

Patent ownership includes the exclusive right to use, make, or sell an invention or method. Patents endure for 20 years after the date of filing. The rights of a patent are defined by the “claims” contained in the patent. For example, in Thomas Edison’s lightbulb patent application he claimed “an electric lamp for giving light by incandescence, consisting of a filament of carbon of high resistance, made as described, and secured to metallic wires, as set forth.” Once the patent is awarded, no other parties are allowed to do or make what is described in the claim, even if the other party is unaware that the patent exists.

A trademark signifies to the consumer the source of a good or service. For example, the trademarked name “Coca-Cola” signifies that a particular beverage comes from the Coca Cola Company. Trademarks cannot be “baldly” licensed; licensing of a trademark cannot be permitted to describe goods or services that are significantly different in quality or other material respects from what consumers expect from the mark.

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