👉 Permission to use a right or asset granted by its owner
🎙 IP Management Voice Episode: Licensing
What is a license?
A license is a permission granted by the owner of a right or asset (such as a copyright, patent, or trademark) to another entity (such as a person or company) to use that right or asset. The license can take different forms and establish different rights and obligations for the licensee and the licensor.
The License Terms set out the rights and obligations of the Licensee and the Licensor in detail.
In principle, any type of intellectual property can be licensed. These include:
- Copyrighted works: books, music, movies, images, software, etc.
- Patents: inventions and technical innovations
- Utility models: Technical solutions for new articles of daily use
- Designs: designs and aesthetic designs of products
- Trademarks: logos, wordmarks and figurative marks
Other rights may also be licensed, such as:
- Know-how: Technical knowledge and trade secrets
- Franchising: The right to use and market a business model
- Sports Rights Licenses: The Right to Broadcast or Market Sporting Events
Intangible assets such as domain names and databases may also be subject to licensing.
In franchising, franchisors grant licenses to franchisees to use business models.
When it comes to the question of how a license should be structured in individual cases and which business objects are suitable for licensing, the professional advice of IP experts should always be sought.
What types of licenses are there?
There are different types of licenses that differ in terms of the scope of rights and obligations granted. The main types of licenses are:
- Exclusive Licenses
- The licensee is the only one who is allowed to use the right.
- The Licensor may not grant any further licenses for the right to other persons.
- Exclusive licenses tend to be more expensive than non-exclusive licenses.
- Simple (non-exclusive) licenses
- The licensor may also grant licenses to other persons for the right.
- The licensee is not the only one allowed to use the right.
- Basic licenses are usually cheaper than exclusive licenses.
- Free Licenses
- The licensee does not have to pay any fee for the use of the right.
- Free licenses are often used for open-source software or free content.
- Paid licenses
- The licensee must pay a fee for the use of the right.
- The amount of the fee can be freely agreed between the parties.
- Time-limited licenses
- The license is only valid for a certain period of time.
- At the end of the period, the license will automatically expire.
- Perpetual Licenses
- The license is valid indefinitely.
- It can only be terminated by termination or cancellation.
- Territorial Licenses
- The license is only valid for a specific area.
- Outside the territory, the licensee may not use the right.
- Worldwide Licenses
- The license is valid worldwide.
- The licensee may use the right in any country of the world.
In addition, there are other special types of licenses, especially for software, such as:
- Proprietary licenses
Here, the software remains the property of the manufacturer, and the source code is not released. Use may be restricted, as with End User License Agreements (EULA). - Concurrent User or Floating Licensing
This type allows the software to be installed on any number of devices, but it may not be used on more devices at the same time than licenses have been purchased. - Named User Licenses
This license is tied to a specific user and is often used for workplaces. - Subscription-based licensing
Here, the user pays regular fees for the use of the software. - Original Equipment Manufacturer (OEM)
This license is used for software that is already pre-installed on a PC and is usually tied to the hardware - Feature-based licensing
Users only pay for specific features or modules. - Network licensing
Multiple users share a license on the network.
On the question of which type of license should be chosen in each individual case, the professional advice of IP experts should be sought.
What licensing models are there?
A licensing model is a system that sets the terms and conditions for the use of licensed assets. It describes, for example, how software is distributed and billed to users, and what rights and obligations the user and the licensor have. The licensing models are about the respective user behavior of the licensed asset.
The most important licensing models are:
- Proprietary Licenses
- Classic purchase license: The user buys the software once and receives an unlimited license to use it.
- Subscription License: The User regularly pays a subscription fee for the use of the Software.
- Pay-as-you-go pricing: The user only pays for the actual use of the software, e.g. per hour or per transaction.
- Open-Source Licenses
- Free: The software is available free of charge and can be freely used, modified and redistributed.
- Dual licensing: The software is available under both a proprietary license and an open-source license.
- Cloud-based licenses
- Software as a Service (SaaS): The software is provided as a service from the cloud and the user pays a regular fee for it.
- Platform as a Service (PaaS): The cloud platform provides a development environment and infrastructure on which the user can develop and operate their own applications.
- Infrastructure as a Service (IaaS): The cloud platform provides virtual servers, storage space, and network resources that the user can use for their own purposes.
Choosing the right licensing model depends on several factors, such as:
- Type of software
Proprietary software is usually more expensive than open-source software. - Usage patterns
If the software is only used occasionally, a pay-as-you-go model may be cheaper than a purchase license. - Budget
Subscription models can better distribute the cost of the software.
When choosing a specific licensing model, the individual needs of the user should be taken into account.
What are important license terms?
License terms are the rules that govern the use of software or other licensed product. They define the rights and obligations of the Licensor and the Licensee.
Key license terms include:
- License Type
Proprietary, open-source, cloud-based, etc. - License Cost/Payment Terms
Purchase price, subscription fees, pay-as-you-go payment, etc. - Rights of use/restrictions on use
installation, use, reproduction, distribution, etc. - Liability Regulations
In the event of damages resulting from the use of the software. - Duration
Temporary or indefinite. - Termination Terms
Terms and Conditions for Termination of the License. - Confidentiality
Licensee’s confidentiality obligations. - Warranty
Liability for defects on the part of the licensor. - Applicable Law
Jurisdiction and jurisdiction applicable to disputes. - Technical Support
Scope and duration of technical support provided by the Licensor.
In addition, especially in the case of software, the following regulations may be important:
- Updates and Upgrades
Licensee’s rights to updates and upgrades of the Software. - Redistribution
Licensee’s rights to redistribute the Software. - Changes to License Terms
Licensor’s ability to change the License Terms.
In individual cases, it is important that the licensee takes careful note of the license terms and conditions and that it is clarified that they can be complied with. When it comes to licensing issues, it is always advisable to consult IP experts.
What do I have to consider as a licensee or licensor?
As a licensor, you should consider at least the following points:
- Choosing the right license type
- What rights do you want to grant to the licensee?
- Should the license be exclusive or simple?
- Should the licence be paid or not?
- Creation of a license agreement
- The license agreement should set out the most important license terms in writing.
- The contract should be clear and unambiguous.
- When in doubt, consult an IP expert.
- Protection of your rights
- It should be ensured that the licensee complies with the license terms.
- You should maintain control over your own intellectual property.
- It should be clear how to proceed against violations of the license terms.
- Tax aspects
- One should consider the tax implications of licensing.
- You should consult a tax advisor for this.
- Other important points
- If necessary, you should also find out about the antitrust implications of the licensing process.
- You should take into account the data protection requirements.
- One should carefully archive all relevant documents related to licensing.
Licensing and licensing strategies are regularly very complex economic and legal projects and should be accompanied by relevant, experienced experts.
What do you have to consider as a licensee?
As a licensee, you should pay attention to at least the following points:
- Choosing the Right License
- What kind of license is needed?
- What are the rights and obligations associated with the license?
- What are the costs for the license?
- Review of license terms
- What are the license terms?
- Particularly important points are: rights of use, liability regulations and the term.
- Is it possible to ensure that the license conditions can be met?
- Use of the asset
- Will the asset only be used in accordance with the terms of the license?
- Especially in the case of software, the copyright notices must be observed.
- Especially in the case of software, the illegal duplication and distribution of the software must be prevented.
- Obligations of the Licensee
- Use of exploitation rights: Can the exploitation right be withdrawn if there is no use?
- Payment of the license fee: How will the agreed license fee be paid?
- Update/maintenance of the asset
- Is the latest version of the asset used?
- Updates and upgrades may include important security improvements and bug fixes.
- Technical Support
- What are the technical support options?
- What options does the licensor offer if there are problems with the licensed asset?
- License Cancellation
- What are the cancellation conditions?
- A license should be terminated in advance and in good time when it is no longer needed.
Licensing and licensing strategies are regularly very complex economic and legal projects and should be accompanied by relevant, experienced experts.