What’s the difference between assigning and licensing of your Intellectual Property?
Simply put, assigning your IP transfers ownership, and therefore rights, to the assignee. For example, if you sold your trademark, you would assign it to the buyer. When licensing your IP, you maintain ownership and rights and are able to charge a royalty of others wishing to have permission to use your IP.
Selling or transferring your IP rights to another person. Once you assign your IP rights, you can no longer control the registered IP; the assignee will have this control. In respect of trademarks, you may assign a registered trademark to another party for all of the goods or services it is registered for, or just some of the goods or services.
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An agreement that allows the licensee to use the Intellectual Property owned by the licensor, under the specific conditions of the agreement. The licensor still owns the intellectual property and therefore maintains control. The agreement will often require the licensee to pay a royalty or fee for the permission to use the intellectual property:
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A payment received by the licensor for the use or right to use their intellectual property rights – including copyrights, trademarks, designs and patents. In most cases, royalties are set on a percentage basis and calculated based on sales. If you have a general licensing agreement that may be used by multiple other parties, you could set a ‘once off’ fee for those parties to use your intellectual property, or set a standard royalty based on a percentage of sales, which normally be around 5-7%. However, in cases where you are forming an exclusive agreement with one other party you could negotiate the royalty yourselves.
Some General Examples:
If you owned IP in your own name or a family trust, for example, you could have a licensing agreement between that owner and your trading company, which allows the trading company to use the IP. In this instance you could elect to have the trading company pay you or the family trust a royalty, or you could have a ‘royalty free’ agreement.
Even if you own the IP as well as the trading company, it is advised you still have a licensing agreement in place so that if another party ever challenges ownership, you can support the structure of use by the company.
If you own the rights to a name, or a product that other parties may have a true interest in also using, you could set up on a website, for example, a licensing agreement that includes the standard conditions you wish to set for other people using your IP. In the case of a brand name, this could include the colours or way it is depicted. Persons could submit via your website their agreement to abide by the terms of your licensing agreement and provide a once of payment for the right to use that IP. With so many online payment options these days, this can be done ‘up front’ if preferred. Or, they may agree to provide credit card details for you to process a payment each month, quarter or year at a certain percentage. All of these details are up to you to set as you see appropriate.
If you choose to have such a general agreement to be used, especially when it’s on the Internet, it is important to have a signed form or copy that includes the licensees name and address details, along with phone and alternative contact details to allow you to contact them if required.
What happens to my IP if I sell my company or business?
If you own IP in your company name, rather than a family trust or individual/s name/s, and you sell the company, often such sale agreements would include the sale of assets belonging to the company, which includes intellectual property. IP is classed as being a saleable asset that can have value applied to it.
If your sale agreement includes the assets you would not necessarily need to assign the IP as the company would still be the owner, it would be the controlling persons of that company that are changing. You would possibly need to amend the address details or contact details for your IP so that the new owners receive future correspondence.
It is often recommended that you own IP in your own individual name/s or in a family trust and formulate a licensing agreement with the trading company, rather than own the IP in the company’s name.
This way, if a licensing agreement is in place with you or a family trust at the time you sell the company, it is possible that this agreement would continue with the new company owners, and you will continue receiving an income from the royalties, if they apply.
If at the time of selling your company you no longer have interest in maintaining the rights to your IP, you will be able to sell it as a separate item to the new owners if it’s registered to you, as it won’t be necessarily be included as a company asset. This allows you to make money in addition to the sale of the company. Alternatively, if you maintain the rights you could formulate a new licensing agreement with the new owners where by they pay you a royalty for continuing to use your IP.