This article is written by Pratik Pravin Patil who is pursuing a Certificate Course in Intellectual Property Law and Prosecution from LawSikho.
An agreement may be interpreted as a document containing words describing the consensus arrived at, by the parties to the arrangement with an understanding and acceptance of mutual legal rights and responsibilities and carry out specific actions or obligations that the parties intend to exchange; a mutual consent to do or refrain from doing anything; a contract. Under Section 2(e) of the Indian Contract Act, 1872, the word “Agreement” is specified as every promise and every set of promises to be considered for each other is an agreement.”
And as far as Licensing Agreement is considered, it is a legal document between two parties, the Licensor and the Licensee, in which one party (the Licensor) grants permission or authorization to another party (the Licensee) to use his/her property/intellectual property/brand name or trademark/patent technology under certain terms and conditions.
Intellectual property of a business is an intangible which at the same time is a highly valuable asset. Since other businesses usually overlook IP security, knowing the worth of one’s IP will give businesses a competitive advantage over their rivals in the market. Though one cannot always be in the best position to make the most of their IP. There are several ways to maximize the commercial value of one’s intellectual property. And one such way is through licensing and assigning the property.
In order to understand these concepts in depth, this article analyses each concept in detail.
A license agreement is a formally composed legal agreement between two parties wherein the proprietor owning the property permits another party to utilize the property in consistence with a specific arrangement of terms and conditions. Licensing agreements usually involve a licensor and a licensee as a party to the arrangement entered into.
Licensing arrangements lay out the conditions under which another party is permitted to utilize the property owned by the proprietor. Despite the fact that the properties in question include a wide range of items, such as land interests and personal possessions, license agreements are most extensively utilized for licensing of intellectual property, such as patents and trademarks, including copyrights for printed materials and visual arts.
An IP license arrangement is basically a contract between the owners of an IP and a third party that allows the third party (licensee) to access, utilize, or appreciate certain rights associated with the protected innovation, in return for a royalty or co-licensing of IPs. This type of agreement specifies how the licensee can conceivably may or may not utilize the licensor’s assets.
Licensing is favorable to proprietors owning IP because it facilitates them in gaining an income from their property by making it accessible to others over a payment of royalty without compromising their ownership.
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Types of Licensing Agreements
Exclusive Licensing Agreement: This type of agreement creates a unique relationship between the licensor and the licensee. During the term of the agreement, no one other than the designated licensee is allowed to exploit or use the licensed asset.One of the unique trait of this type of agreement is that even the licensor is absolved or prohibited from utilizing or abusing the licensed property during the term of the agreement.
Depending on the dealings between the parties to the agreement and their negotiations, an exclusive license may either be issued for a specific jurisdiction or the entire globe. Where an exclusive license is restricted by area of use or jurisdiction, it’s critical to spell out just how much or to what extent the licensee is actually allowed to enforce the intellectual property rights. A territorial exclusive license is typically given to Indian companies by foreign companies in order to avoid the risk of entering a new market while also leveraging it at the same time.
The simplest instances of an exclusive licensing agreements are copyright, trademarks, and patent licenses.
Non-exclusive Licensing Agreement: In this type of agreement, the licensor may grant the license to almost any number of licensees and also at the same time use the licensed assets for the length of the agreement entered into.
Co-exclusive Licensing Agreement: This type of arrangement necessitates the use and management of the licensed property by more than one licensee, but this type of agreement usually restricts the number of licensees the licensor can license his property to and the number of permitted licensees are determined at the time of signing the license agreement.
Sole Licensing Agreement: A sole license is issued when the licensor wishes to retain his intellectual property rights while also licensing it to only one licensee for a specific territory or the entire world. The licensor cannot license his intellectual property to any other licensees in this situation. The only difference between this type of agreement and an exclusive licensing agreement is that here the licensor retains the right to use the licensed property for the duration of the agreement.
An IP assignment, unlike a license, is a permanent deal of IP where the asset in question is permanently transferred to the assignee. This is an irreversible transition that usually happens when an owner (assignor) sells or transfers property to a buyer (assignee). Any proprietor wishing to pass IP ownership through assignment has to make sure that it is done in writing, either by a deed or some written agreement, in return for a lump-sum payment of royalty.
Traits that distinguish a Licensing Agreement and an Assignment Agreement
Transfer of Interest vested in the Intellectual Property: Under Licensing agreement, the licensor not just permits the licensee to utilize his Intellectual property in a specific way, but also owns a stake in it for himself to be more precise. For example, if you want to benefit from the benefits of transmitting your IP while retaining power, intellectual property licensing is a good option. It allows the licensor to not only receive a consistent income from their licensee for a predetermined amount of time but also allows the licensor to grant the same privileges to multiple users. This allows you to not only decide how the permitted party should utilize your Intellectual Property, but also allows you to terminate the agreement if it appears to be detrimental or disadvantageous.
Assigning IP, on the other hand, means that the IP owner transfers all of his rights, including his title over the property, to the assignee. It’s a permanent assignment, and once it is made, the assignor loses all rights he had over his intellectual property. If you delegate your Intellectual Property to another, for example, you relinquish all responsibility for those products. It means you can no longer sue or complain against the assignee over problems relating to your intellectual property. These agreements are appropriate when you are selling your whole corporation or exiting the industry altogether.
Notification: Another significant distinction between the two agreements is the need for notice in order for them to be admissible and binding.
Another significant distinction between the two agreements is the need for notice in order for them to be admissible and binding.
If the agreement in question is regarding IP assignment, the assignor must send an application to the assignment recordation division expressing his desire to transfer his title or ownership (IP rights) over his Intellectual property. Since the assignment of Intellectual property is permanent, it is mandatory that the agreement be written on paper transcribing the interest of the parties to the agreement. In the case of IP licensing, on the other hand, the rights may be granted orally. A written record or notification with any legal office isn’t usually deemed necessary for ensuring the enforceability of rights under IP licensing.
Consideration and reversal of transfer: IP licensing allows for long-term compensation and the reversal of rights transferred if the deal appears to be unprofitable. IP assignment, on the other hand, requires upfront payments and does not allow for reversal of title over transferred assets.
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