The for-profit or non-profit business you run likely owns an array of intellectual property often called “IP” for short. The federal government defines “intellectual property” as “creations of the mind, such as inventions; literary and artistic works; designs; and symbols, manes and images used in commerce.” As a business owner, you may have patents, trademarks, copyrights, or brand assets that are just as valuable — or in some cases, MORE valuable – than your business’s tangible assets.

However, as brand owners, your IP rights can amount to more than just another item on a balance sheet. With a creative brand licensing strategy, your IP rights can create powerful new revenue streams, which you can reinvest in your business or community. Those same rights can also add a lot of value to your business should you ever wish to sell.

While you might think that licensing only works for big-name brands, it can actually be a valuable tool for small businesses and nonprofits as well. Read on to learn more about how developing a brand licensing program can benefit your business and help it grow!

What Is an Intellectual Property License?

While you can sell your business’s IP outright, just like you can with your tangible assets, you will permanently lose your IP rights and no longer maintain any control over the IP. Obviously, that type of transaction is not conducive to creating ongoing revenue streams for your business.

As business owners, our businesses and all they entail are extremely personal to us. With an IP licensing program, a business can retain some control over their IP while still capitalizing on its value. A true win-win! A common form of IP licensing used by small businesses and nonprofits is trademark licensing. 

So, how does trademark licensing work? The answer is fairly straightforward. As a licensor, your company will authorize a licensee to use your licensed IP in exchange for a fee or royalty rate. Your business will maintain trademark rights and ownership of your intangible IP assets while allowing others to use them. The same process is true of copyright licenses such as licensing your methods and knowhow. And, since you are the license owner, you can direct the usage of the IP you license, as well as the qualifying parameters for the license.

What IP Can Be Licensed?

Usually, any type of IP your company maintains ownership of can be temporarily transferred via a brand licensing agreement. Examples of IP that can be licensed include:

• Trademarks and service marks
• Patents
• Copyrights

There is no one-size-fits-all licensing business strategy. The brand license owners who are the most successful in licensing have the ability to view their entire IP property suite as part of their comprehensive brand image and incorporate licensing as an essential part of their brand strategy.

Types of IP Licenses

There are three common types of IP licenses that you should consider when licensing your brand. Remember, the authorization is granted for a specific amount of time and can also be restricted based on geographical scope or market, in addition to other restrictions you deem necessary.

Exclusive License

Essentially forfeiting your right to use the IP yourself for the length of the agreement, an exclusive license grants one entity all use of the IP. If you give an exclusive license, make sure you understand the ramifications of the transaction and that you are receiving fair value in return.

Sole License

The major difference between a sole and an exclusive license is whether you retain the right to use your IP yourself. With a sole license, the licensee is the only entity allowed to use the property besides your company. An exclusive license forecloses your right to use the property yourself.

Non-Exclusive License

Under a non-exclusive license, you are not prevented from authorizing other licenses of your IP or using the property yourself. The revenue from one non-exclusive license will be less than other types but may amount to more revenue if you aggressively issue additional licenses. 

No matter what type of license you use in a specific instance, be sure it is part of a comprehensive IP monetization strategy.

How to Create an IP License

To properly profit off your intellectual property through licensing, you first need to understand what IP is in your company’s portfolio. Before seeking license agreements, review the registration status of your IP. 

Review Your IP Registration

Check with the United States Patent and Trademark Office for the rules regarding renewing your trademark rights. Also, if you are considering licensing a copyright, remember that those are managed separately by the U.S. Copyright Office. For foreign assets, consult each country’s rules about maintaining your IP ownership rights.

Determine Your Goals for Licensing

Once you have verified the IP you want to license, you are still not quite ready to seek out potential licensees. The next step is discussing your priorities regarding licensure. Some common questions to review include:

• How much revenue are you hoping to receive from a brand license?
• How much control over your intellectual property are you willing to concede?
• What will the licensee approval process look like?
• How long do you intend to assign your rights to the licensee(s)?
• Will you receive more revenue from a one-time fee or through a usage royalty?
• Would you rather work with a few close licensees or license the IP widely?

Again, licensing your business’ IP is not a decision to make in a vacuum. Instead, the smartest companies license IP as part of their larger strategic business plan.

Hire an Attorney

An IP license is a legal contract between multiple entities. Poorly drafted licenses can end up causing all sorts of disastrous outcomes, including damaging your brand assets. Avoid bad outcomes by proactively seeking counsel before communicating with potential licensees.

Use Your Leverage in Negotiations

Selling a trademark license or other IP licenses is like any other business deal — it requires delicate negotiation. Licensees will seek to pay as little as possible for the most control over the IP and for the longest period of time possible. Every one of those terms is negotiable. Never forget that your company has the desired property and the exclusive right to market it. Therefore, you have the leverage to obtain a better outcome.

Be a Reliable Partner

Once you have signed the licensing contract(s), be sure to follow through with your obligations. It is in your interest that your licensee properly uses your intellectual property. Think of it as a landlord thinks of a tenant. You do not want a renter to wreck all the value out of your building. The same is true for your licensees of your brand. Active communication and relationship maintenance can go a long way during the term of your license agreements. 

How To Turn an IP License into Revenue Streams

Maximizing revenue is vital for all entities. Even nonprofit companies benefit from expanded revenue opportunities to help carry out their social missions. Granting IP licenses as a nonprofit can be a powerful tool because you will generally receive revenue passively once the agreement is in place. Increased revenue without correlating expenses ends up as pure profit or income that can be reinvested in a social enterprise.

Issuing IP licenses can also expose your for-profit and non-profit brand to new markets, helping you find new clients, customers, or even service providers. Capitalizing on your business’ intellectual property is essential to staying relevant in today’s brand-centric world. Not to mention that few growth opportunities offer the same upside of extra revenue without corresponding additional risks or expenses.

Working with experienced legal counsel is vital to a successful IP licensing program. Mod Law Firm is committed to helping small businesses and non-profits grow and achieve their goals, and we would be happy to help you develop a licensing strategy for your brand. If you want to learn more about what IP licensure can do for your business, schedule an initial consultation with a Mod Law attorney today! We’d love to chat with you; schedule a chat today!