European IP Helpdesk

Bulletin No. 1 Licensing


There is a challenge which faces all businesses, large or small, whether they are suppliers of products or services, and that is to stay competitive. Staying competitive requires introducing innovative products, services and methodologies.

But how can they achieve this? Small and medium-sized enterprises (SMEs) don’t usually have time to do much research. Most successful innovations in companies are built by working with others universities, research institutions and other businesses, and that is usually done by licensing intellectual property (IP) in or out. Even larger companies need to license in IP to help them innovate no one has a monopoly on invention or creativity.

SMEs may not have the capacity to expand into other geographical territories. However, they may be able to find a company with local knowledge to do this for them. They could expand their business and strengthen their brand by licensing out their IP, and quickly establish a presence in a new territory, without having to learn about and adapt to new regions.

A company’s own IP might also have value for other applications, outside the company’s core business areas. So, they could increase their revenues by licensing out their IP to companies for different fields of use, and therefore expand their business without having to become familiar with new application areas.

This is the essence of Open Innovation: It is about using other people’s IP (i.e. licensing in), and conversely making the IP you own, but do not use, available to others (i.e. licensing out).

Each licence is unique, depending on the specific terms which are agreed. It is a bit like creating a new dish in a restaurant with each ingredient selected as needed, in the appropriate quantity and with the right treatment.

This short article gives an overview of the main commercial ingredients of a licence agreement; and shows how each of these can be adapted and combined to produce an agreement that meets the objectives of both the licensee (who is licensing in) and the licensor (who is licensing out). It does not comment on the legal issues.

Key Ingredients in a Licence

Written by Dr Eugene Sweeney, Senior Policy Advisor of the European IP Helpdesk

Photo by Clement Bergey on Unsplash