An IP license grants a third-party licensee the right to use your intellectual property in exchange for a fee or ongoing royalty payments. It is also a means of getting additional capital into your company, particularly if you are not currently using the IP or are only using it in a particular sector and/or geographical territory.
There are many reasons why a firm may wish to license its IP, such as:
- Sharing Risk: When a licensor grants permission to a licensee to manufacture or sell products, the licensor receives income for the license without bearing the risk of manufacturing, promoting or selling the product itself.
- Revenue Generation: The license holder may commercialize the IP in order to gain additional income.
- Market Penetration: The license holder may license another business to sell or conduct business in a territory that the owner cannot cover