What Is a Patent Licensing Agreement? Key Terms and Why They Matter
Learn what a patent licensing agreement grants, how exclusive and non-exclusive terms differ, and which clauses protect you. Book a free IP strategy call.
[SERVICE]IP licensing and assignments
IP licensing agreements and assignments, drafted and negotiated
A license lets you earn from your IP and keep it. An assignment moves ownership for good. We draft and negotiate both, so the rights in the agreement match the rights you hold.
Your attorneys
Andrew RapackeManaging Partner · Registered Patent AttorneyFormer Naval Engineering Officer. M.S. in electrical and electronics engineering.
Ken BrooksRegistered Patent AttorneyMaterials science and engineering. Patents in software, AI, and electrical and mechanical systems.
[01]Who it's for
For owners licensing out, and companies licensing in.
Licensing can bring in revenue, open new markets and fund development. The structure and the terms decide how much of that value you keep.
Patent owners
Royalties from a patent, exclusively or to several licensees, without selling it.
Brand owners
Licensing a name or logo to partners and manufacturers while keeping control of quality.
Software companies
Licenses that set how customers and partners may use your code.
Startups taking a license
Rights to a technology you need, on terms that survive a raise or an acquisition.
[02]What we handle
Terms that protect your IP and your returns.
We work through the business decisions with you, then put them in an agreement that defines each side’s rights and obligations clearly.
We identify the risks in a deal before you sign and build in protections for your IP and business.
What we draft and negotiate
- License agreementsExclusive, non-exclusive and limited licenses for patents, trademarks, copyrights, software and know-how.
- Royalties and paymentRoyalty rates, payment structures, minimums, audits and reporting.
- AssignmentsTransfers of ownership, including founder and contractor assignments to the company.
- EnforcementEnforcing licensing rights when a licensee breaches or stops paying.
Terms that cause disputes
- A vague grantField, territory and exclusivity left open to argument.
- No quality control on a trademarkA brand license without it can put the mark itself at risk.
- Silent on improvementsNo answer on who owns what either side builds next.
- Weak terminationNo clear way out if the licensee underperforms or breaches.
[03]The basics
What is an IP licensing agreement?
An IP licensing agreement is a contract in which the owner of intellectual property, the licensor, lets someone else, the licensee, use it on agreed terms while keeping ownership. It sets what may be used, where, for how long, and what the licensee pays.
| License type | What it means | When it fits |
|---|---|---|
| Exclusive | Only the licensee may use the IP in the licensed field or territory, sometimes not even the owner | A partner investing heavily to commercialize it |
| Non-exclusive | The owner may license the same IP to others | Software, standards and broad markets |
| Limited | Use restricted by field, territory, time or product | Splitting one technology across markets |
| Sole | Only the licensee and the owner may use it | An owner who still wants to sell |
Key terms in a licensing agreement
- Grant of rights. The exact IP licensed, the field of use, territory and exclusivity.
- Royalties and payment. A running royalty, a lump sum, upfront fees, milestones or minimum annual payments.
- Reporting and audit. How sales are reported and the licensor’s right to check them.
- Quality control. Required for trademark licenses, and common for any product carrying your name.
- Improvements and sublicensing. Who owns later improvements, and whether the licensee may sublicense.
- Enforcement. Who may sue an infringer and who pays.
- Term and termination. How long the license runs and the grounds for ending it.
For patent licenses specifically, read what a patent licensing agreement is and its key terms. For software, see how a proprietary software license cuts piracy.
[04]By type of IP
Licensing patents, trademarks, software and know-how.
The same agreement works differently depending on the IP behind it.
| Patent | Trademark | Copyright and software | Trade secret and know-how | |
|---|---|---|---|---|
| What is licensed | The right to make, use or sell the claimed invention | Use of a name or logo on goods or services | Copying, using or modifying the work or code | Use of confidential information |
| What the licensor must do | Keep the patent in force | Control the quality of licensed goods | Define permitted uses clearly | Keep it secret, with confidentiality terms |
| Typical payment | Royalty on sales, or a lump sum | Royalty on sales | Subscription, per-seat or one-time fee | Fee or royalty, often with a technology license |
| When it ends | No later than the patent’s expiration | As the agreement says | As the agreement says | When the agreement ends, or if the secret becomes public |
Brand licensing has its own strategy, covered in branding and licensing like a pro. Larger deals that move research into a company are on our technology transfer agreements page.
[05]Assignments
IP assignments, and why investors check them.
An assignment transfers ownership of IP outright. Inside a startup, the most important ones move what founders, employees and contractors create into the company.
- Patents. An assignment must be in writing. Record it with the USPTO, generally within three months, to protect against a later buyer who did not know about it.
- Trademarks. A mark is assigned together with the goodwill of the business. An assignment without it can be invalid.
- Copyrights and code. A transfer of ownership must be in writing and signed. Without one, a contractor usually owns what they wrote.
- Founders and employees. Invention assignment agreements should be signed before work begins, or as soon as possible after.
More on what happens to IP when founders split, in what happens to the IP when founders dissolve a company.
[06]Fees
One flat fee, quoted before work begins.
There is no hourly billing. Your licensing agreement or assignment is quoted as a flat fee on your strategy call, once the scope is clear, and nothing starts until you approve it.
Book A Free Strategy CallWhat sets the fee is the work itself, not the time on the clock.
- The IP involved. One trademark is simpler than a portfolio of patents and software.
- Drafting or negotiating. Writing the first draft, or working through the other side’s.
- The deal structure. Exclusivity, royalties, milestones and sublicensing terms.
Ongoing work for a growing company can run on a monthly Fractional IP Counsel plan instead of one fee per document. This service is not covered by The RLG Guarantee, which applies to patentability searches, provisional patents, design patents and trademarks.
[07]The process
From first call to a signed license.
What happens at each step and who does the work. Timing depends on the other side and is never a promised date.
IP licensingCall to signed
- Day one01Day oneStrategy callFree. Walk us through the deal, the documents or the problem.
- Flat fee02Flat feeScope and flat feeWhat the work covers and its price, in writing, before it begins.
- 03Rights and strategyWe confirm what you own and the licensing model that fits.
- 04Draft and negotiateThe agreement written or marked up, with you approving each change.
- 05Signed and recordedExecuted, with assignments recorded where they should be.
[08]Questions
Questions about IP licensing agreements.
Still deciding? Your first call is free and comes with a straight answer on the structure that fits.
Book A Free Strategy CallWhat is an IP licensing agreement?
A contract that lets someone use intellectual property, such as a patent, trademark, copyright or software, while the owner keeps it. It sets the scope of use, the territory, the term and the payments.
What is the difference between a license and an assignment?
A license grants permission to use the IP, and the owner keeps it. An assignment transfers ownership outright. Licenses can be limited by field, territory or time; an assignment moves the whole right.
What is the difference between an exclusive and a non-exclusive license?
With an exclusive license, only the licensee may use the IP in the licensed field or territory, sometimes not even the owner. With a non-exclusive license, the owner can license the same IP to others.
How are royalties calculated?
Usually as a percentage of net sales of licensed products, sometimes as a fixed amount per unit, a lump sum, or milestone payments. Many licenses add a minimum annual royalty so an exclusive licensee cannot sit on the IP.
Do licenses and assignments need to be recorded?
Patent assignments should be recorded with the USPTO, generally within three months, and trademark assignments can be recorded too. Recording protects the new owner against later buyers. Licenses usually are not required to be recorded, though exclusive licenses often are.
What happens if a licensee stops paying or breaches?
The agreement’s termination and dispute terms decide. We can enforce your licensing rights, negotiate a cure, or end the license and stop further use.
Can my startup license IP it does not fully own yet?
Not safely. You can only license rights you hold. If founders or contractors created the IP, assign it to the company first, then license it.
How much does an IP licensing agreement cost?
With us it is a flat fee, quoted on your strategy call before any work begins. It depends on the IP, whether we draft or negotiate, and the complexity of the deal.
[09]Learning Center
Go deeper on licensing.
Stop Leaving Money on the Table: How a Proprietary Software License Cuts Piracy and Boosts Profit
Your competitors are reading your software’s source code right now, or they would be, if you hadn’t protected it with the proper licensing strategy. When Adobe…
Branding and Licensing Like a Pro: A CEO’s Guide to Scaling Without Massive Capital Investment
When Disney generated over $53 billion in licensed retail sales in 2017, it showcased the sheer power of strategic branding and licensing. The Walt Disney Company is a…
[10]Client reviews
Owners who protected what they built.
4.7 across 614 public reviews on Google, Trustpilot and Avvo.
#1Top reviewed IP law firm*
Read client reviews“Andrew Rapacke and his team are exceptional. They did our provisional and non provisional patents. The entire team is professional and an ease to work with.”
Von DorjevskiFounder, Inguardia Health · Client review “I can safely trust them with scientific and legal integrity regarding ownership and accountability of inventions.”
Hussain AtherPatent · Client review “The Rapacke Group stands by their fees with no surprises.”
Lowell CrawfordClient review
Reviews reflect individual client experiences. Quotes are excerpts. Prior results do not guarantee a similar outcome. *#1 top reviewed means the most public client reviews on Google, Trustpilot and Avvo of any US patent or trademark firm.
License it on your terms.
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