Among the benefits of IP registration is the potential to create new revenue streams, for example, the transfer or license of IP rights.

Transferring your IP rights

This means transferring ownership of your IP rights to another individual or company. As the seller, you will have no control over how the new owner uses the rights, and you will not be responsible for them.

Licensing IP rights

This sees you, as the IP owner (licensor), authorise another person or company (licensee) to use your IP asset under specified conditions, usually in exchange for a fee. A license agreement can form part of a more complex contract, such as a franchising or distribution contract, or be a separate contract, for instance, a software license agreement.

When it comes to franchising, the IP owner (franchisor) authorises another person or company (franchisee) to use their brand’s trade mark, trade name or business system in exchange for royalties and often an initial fee.

Franchising enables rapid business expansion and brand presence as well as access to local market knowledge while reducing capital requirements and risks. On the other hand, the franchisee benefits from a successful business model, an established brand and the franchisor’s know-how, for example. Popular franchising sectors include food and beverage and retail.

To ensure the franchise system’s integrity and smooth operation while minimising potential conflicts, it is crucial to manage and address all relevant IP issues in a franchising contract. Some EU Member States have enacted specific laws and regulations to deal with franchising (e.g. Italy, Lithuania, the Netherlands), while in others, franchising is governed by general civil and contract law rules.

Contract considerations

In both transfer (sale) and licensing scenarios, it is essential to address the contract’s following key aspects.

• Identifying involved parties: names and details of the contracting parties.
• Clear description: a comprehensive and detailed account of the IP right, without reference to external registers.
• Fees and payment terms: the fee amount, payment deadlines and payment method (currency, form, etc.).
• Warranties and liabilities: the responsibilities of both parties in case of contract non-compliance, including the responsibility of the seller or licensor in case of legal defects of the IP right sold or licensed.
• Confidentiality: whether certain information on the IP right or contract terms should be kept confidential by the parties.
• Governing law and dispute resolution: the governing law in case of a potential dispute and the chosen method for dispute resolution (e.g. court jurisdiction, alternative dispute resolution).

In case of a license agreement, also the following issues should be addressed.

• License scope: clearly defining how and where the licensee is authorised to use the IP asset (e.g. the licensee is allowed to display the trade mark on their website and place it on their products; the licensee is allowed to use the trade mark within the EU territory).
• License term: specifying the duration of the licensee’s authorisation to use the IP asset (e.g. 1 year).
• License fee calculation: determining whether the fee is fixed or dependent on factors like revenue or usage volume (royalties).
• Indemnification: identifying who is responsible for potential third-party claims on using the licensed IP right.
• Licensor’s rights during the license term: addressing whether the licensor can continue to use the IP asset during the license term.
• Ability to grant sublicenses: clarifying whether the licensee can sublicense the IP right to third parties.

It is advisable to seek the expertise of an IP professional to help you draft and negotiate a sale or licensing agreement, ensuring the protection of your rights and interests. It is also worth consulting an IP valuation expert ahead of entering such agreements to determine the value of the IP assets. This can support you in fee negotiations, ensuring that the fee you receive or pay is fair and adequate.

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Your guide to IP and contracts