For an individual or business that owns a piece of intellectual property like a patent, trademark or copyright, licensing that IP can be a valuable income stream. But you need to be careful to avoid a mistake that could cause problems and even potentially lead to expensive litigation.
Among the disagreements that can arise in an IP licensing agreement, there are:
- Royalties. How are royalties calculated — by sales, revenue, or some other means?
- Escalation clauses. It’s common for the parties to negotiate an escalation clause that details how the license owner’s royalties go up if something happens. If the agreement contains an escalation clause, it must clearly lay out what the trigger is and what the royalties become if so.
- Government regulations. The license holder and licensee might not be the only parties to an IP licensing contract. Depending on what is being licensed, government regulations could apply.
The best way to minimize the risk of conflict with a licensee is to have a contract that clearly lays out both parties’ rights and obligations, and methods of conflict resolution that the parties will try before litigation. A detailed and carefully negotiated licensing agreement can reduce or eliminate a lot of potential headaches and disputes months or years down the road.
The benefit of an experienced litigator
Whether your company has dealt with licensing agreements before, you would benefit from experienced legal advice and representation in negotiations. Working with an attorney who is also proficient in complex litigation can also help protect your company and your future business goals.