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Preparing to license intellectual property

Here’s a key skill technology entrepreneurs need to master.

Licensing of intellectual property (IP) has broad impact in technology businesses. Whether you hold IP or intend to license another’s IP, the rules and contracts for licensing are intricate. You’ll need an experienced attorney to handle this process for your business entity.

However, you should still do your due diligence and come to the attorney with helpful information. Here’s what you need to know before you initiate any licensing proceedings:

Decide on a licensing strategy

Think about your long-term goals for your business. What are your plans for your IP? It would be best to discuss your strategy with all decision-makers in your business as well as your attorney to plan for the future.

There are three primary ways to license patents

  1. License for your own company’s use. You need to make sure that your business entity possesses the proper legal permissions to continue developing your IP and potentially selling it.
  2. License for royalties. This can provide a stream of income independent of your direct selling efforts. It is also a great option for a business owner more interested in creating new technology rather than producing and selling products. This business could license the IP they need to use, sell, or make a product or technology.
  3. License to create a standard. This is when a company opens up a patent in order for other companies to use it and, as indicated by the name, create a new standard product in the industry. This strategy benefits the originator because it removes marketplace barriers that might otherwise hinder progress.

Once you’ve decided on your strategy, you need to gather some information before you begin the licensing process:

  1. Define what you are licensing. This includes what kind of IP (patent, copyright, image, etc.) and what rights are being conveyed. Will the acquirer have the rights to use, to sell, to make? You need to determine which or all of these apply.
  2. What limitations, if any, are you placing on this license? For example, a license can be exclusive or non-exclusive. It can be specific to a geographic region or industry. Will the licensee have the right to sub-license? These are all important questions as they will affect your company’s ability to grow and expand beyond this one piece of intellectual property and single license deal.

There are few things more important to your business than the ability to use, sell, and make whatever intellectual property you possess. Ensure you take the necessary steps to secure the proper rights and permissions.

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