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How to licence your intellectual property

02/12/2018David Church

We’ve all seen shows like Dragons Den, where aspiring business geniuses peddle their wares in front of potential investors. Most of the time, they are shot down in flames and leave the studio in tatters. But what do the one in five or six that go on to receive investment have in common?

Strategic business sense? Maybe, but some of these people seek backers precisely because this is lacking. Hard work? Usually, although it is said that Abraham Lincoln was a terribly lazy man. More recently, Brendan Greene was a man who preferred to live on benefits and hand outs, playing online games and designing ones of his own instead of looking for a job. Thanks to his PlayerUnknown’s Battlegrounds game, his net worth is now around $5 billion.

Protect your ideas

The single thing that every successful entrepreneur has is a great idea. But the problem with great ideas is that to monetise them, you have to share them. And when you share them – well, just look at the sad story of Charles Fey. In 1898, he invented the Liberty Bell – the world’s first slot machine. It was a great hit throughout San Francisco, and should have made him as wealthy as Brendan Greene is today. But due to America’s uncomfortable relationship with the world of gambling, he could not protect the patent, and within weeks, other manufacturers were following his design. The message is clear. A great idea can propel you to the top. But unless you protect it with a licence, your time there will be very short-lived.

Defining your IP

Before you do anything else, it’s important to complete some research and background checks. If your idea is that great, are you sure someone else hasn’t already invented it? Answering this question is not always straightforward, and you might need to invest a little money into the services of a patent lawyer. If the research draws a blank, the next step is to define the specific parameters for what is being licensed, and how those who are granted a licence will be permitted to use it. This needs to be clear, unambiguous and clearly recognisable by an objective third party.

How does licensing work

With your IP defined and the licensing rights scoped out, you are ready to start licensing. The first step is to create a licensing agreement. Prepare to be flexible here – there is no “one size fits all approach” so having a basic template that you can then tweak as necessary is ideal. Different parties will have different opinions about what your IP is worth to them, as when it comes down to it, the license is neither more nor less than a written agreement that you are not going to sue someone for using your idea. That agreement might be worth anything from nothing to millions.

A key consideration is whether the licence is exclusive. Clearly, this is tantamount to someone buying or leasing the IP, and is more valuable than if you are licensing it to multiple parties. Also be sure to consider the essential clauses that are common across any type of agreement, such as duration, termination and any geographical limits.

 

 

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