Reducing your risk as a licensor or licensee in patent and technology licensing - the important terms to consider

Intellectual property (IP) licensing, unlike some areas of the law, is a field that usually leaves both parties better off than when they started. The term "licensing," in its most general sense, means granting a person permission to do something that he or she would not otherwise be authorized to do. IP includes patents, trademarks, copyrights, and trade secrets, each of which is a form of intangible asset involving human creativity. In general, the attributes of IP are defined by state or federal law. This article highlights the important issues involved in IP licensing, particularly patent and trade secret licensing. A combination of patent and trade secret rights can provide real commercial value to a licensee and substantial royalty income to a licensor. License agreements, being binding contracts that typically involve valuable IP rights and substantial royalty amounts, also can create significant liabilities for licensees or losses of IP rights for licensors if they are not drafted carefully or if the parties' expectations are not realized.