Applying for a licence

If you wish to grant another party a full or partial licence in respect of your right, both you (as the licensor) and the licencee must sign a licensing agreement. A number of matters must be borne in mind in drawing up that agreement. First of all the territory within which the licence will apply and whether you are granting the licencee an exclusive or a non-exclusive licence; and secondly the compensation due. This includes:

• the amount that the licencee pays you upon signature of the licensing agreement. That amount includes the costs already incurred by you in the development and in protecting your rights;
• the licence fee or royalty. This is an average of 5% of the product’s value or price; and
• the minimum royalty per year.

It is also important to fix the royalties for the territory in which the rights on which the licensing agreement is based do not apply. You must also specify when the agreement can be terminated and what the subsequent legal relationship will be. Finally, it is important in the case of a patent to record information on the further technical development of your invention in respect of the patent.

Other points for attention in drawing up the licensing agreement are:

• the obligation to take quality standards or other instructions given by the licensor into account;
• the licensor’s obligations to take action in the event of infringement or of nullification actions; an arrangement on the part to be played by the licencee;
• a duty of confidentiality;
• sublicensing (whether or not prohibited); and
• registration: under the patent laws of many countries legal consequences are attached to the question whether or not a licence has been recorded in the registers of the patent granting authority of the country in question. Recording of the licence is generally in the licencee’s interest.
  
  Please contact me about licences.