Licensing applies to all areas of intellectual property. It is a very important factor for companies to take into consideration when determining how to profit from their intellectual assets. Many companies derive substantial amounts of money from their licensing programs. Even if a company isn’t actively involved in licensing its intellectual property for profit, it’s still an essential part of many types of transactions, including the development of new products, software, and websites.

What is a License and What Does it Do?

A license gives a limited right to use intellectual property in a certain way. A license is a type of contract independent from intellectual property protection. It’s an agreement between the owner of the intellectual property and someone who wants to use it. Without accepting the license and getting the owner’s permission, the user would typically be committing an act of infringement.

Copyright, trademarks, patents, and trade secrets can all be licensed to other parties. The licensor receives payment (such as a flat fee or royalties) in exchange for letting the licensee use the licensor’s intellectual property. Examples of licensing are all around us. Licensing allows you to watch a movie on television, listen to an audio clip on a website, purchase the latest Star Wars® toy for your children, or access an Internet database.

Licenses also restrict licensees from doing certain things. For example, the “shrink-wrap” license is found in all commercial-off-the-shelf software. It gives the user a number of limited rights, including the right to use the software on his/her computer. It also contains restrictions prohibiting the user from installing the software on more than one computer or “reverse engineering” the program.

Restrictions can take many forms and are a part of almost all licensing agreements. For example, geographic restrictions are common. A licensee may be authorized to use a licensor’s intellectual property in Boston and surrounding cities, but may be prohibited from doing so in other parts of Massachusetts. License terms are sometimes only limited by the parties’ imagination and creativity.

What Can Licenses Do that Intellectual Property Laws Can’t?

Licensing is sometimes the only way to fully exploit certain intellectual assets that can’t otherwise be protected. Databases are a prime example of this. Databases typically consist of some materials that are protected by copyright (such as newspaper and magazine articles) and some that are not (such as facts and ideas). Under copyright law, a database is considered a “compilation.” This is a collection of pre-existing materials selected in such a way that the resulting work as a whole constitutes an original work of authorship. Even if the owner of the database doesn’t own the copyrights in the material making up the database, the organization and structure may qualify it for copyright protection.

DVD disk and databaseThe question is more difficult if the database consists of unprotectable facts. This may be copyrightable if the facts are selected or arranged in such a way that the database constitutes an original work of authorship. However, this only protects the database as a whole from being copied. It does not prevent an individual from extracting and using those facts for his/her own purposes.

A license can prohibit a user from taking the data and using it in a way that the database owner did not intend. For example, a common license restriction prohibits a user from taking data, creating a new database, and then making it available to third parties. Without this restriction, a database owner could find itself in competition with its own users. If it wasn’t for licensing, many database companies would have difficulty protecting their main assets and making money from them. Until the United States enacts comprehensive database protection like that found in the European Union, licensing remains the best option to ensure that database owners can maximize the value of their main asset.

In technology, licensing is an integral part of most transactions. Whether you are the licensor or licensee, we can help you negotiate and draft licensing agreements for a wide variety of situations. We listen to what your concerns are and pay careful attention to the details to ensure that your company’s needs are addressed at all stages in the licensing process. We handle licenses involving:

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