Licensing is a crucial aspect in the commercialisation of intellectual property. However, we frequently come across agreements, from both big and small firms, as well as local and international, that provide for a “sole & exclusive” licence.
To clarify, there is no such thing as a “sole & exclusive” licence.
Now that we have gotten that out of the way, let's dive into the three main types of licences and what they mean.
- Sole Licence
A sole license grants the licensee the right to use the intellectual property to the exclusion of other third parties, but the licensor retains the right to use it as well. This type of license is often misunderstood, as it is sometimes confused with exclusive licenses. However, it's important to note that a sole license does not prevent the licensor from using the intellectual property themselves.
- Exclusive Licence
An exclusive license grants the licensee the right to use the intellectual property to the exclusion of anyone else, including even the licensor. This type of license is highly valuable to the licensee as it provides the licensee with complete control over the intellectual property. However, there is, of course, a risk to the licensor in granting such rights, and these are often tempered with things like minimum performance criteria that must be met for the licensee to retain their exclusivity.
- Non-Exclusive Licence
A non-exclusive license allows multiple licensees to use the intellectual property simultaneously. The licensor can grant the same rights to several licensees (as well as make use themselves). This type of license is common in industries where the widespread use of intellectual property is beneficial.
Key takeaways
Understanding these different types of licences can assist with navigating the complexities of intellectual property licensing and inform strategic decisions that align with overall business goals. It is also important to manage the risk associated with different types of licensing. For example, when granting an exclusive licence to a new licensee, one might consider limiting the term, geographic extent of the licence and other limitations to the scope of the license (such as only granting exclusive rights to parts of the IP only and not the entire bundle of rights) in order to mitigate the risk (in particular that the licensor is prohibited from making use of their own IP).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
