IP Topics
Transactions and Licensing.
Intellectual property is licensed to partners, assigned in acquisitions, pledged in financings, and reviewed in due diligence.
In Short
An IP transaction transfers rights by license, by assignment, or as part of a larger deal. What the rights are worth depends on the chain of title, any encumbrances, and the exact wording of the grant. Errors in the documents can lead to disputes, and in some cases a buyer may not own what it paid for.
Common situations.
- Technology, content, or brand rights are being licensed in or out.
- A buyer is acquiring a company whose value is its intellectual property.
- Capital is being raised against an IP portfolio as security.
- Two parties are entering a joint development or collaboration agreement.
- Technology is being spun out of a company or university.
- The deal documents say little about intellectual property.
The Vocabulary
Key deal terms.
Many licensing disputes come from parties using the same words to mean different things. These terms determine what rights actually transfer.
Scope of the grant
Which intellectual property, which fields of use, which territories, and for how long. Vague grants often lead to disputes over what was transferred.
Exclusive vs. nonexclusive
An exclusive license means no one else receives the same rights, and depending on the wording, sometimes not even the licensor. A nonexclusive license leaves the licensor free to license others.
Field of use
The range of applications the license covers. Narrow fields let a licensor license different markets to different licensees; a broad field concentrates value and risk in one licensee.
Sublicensing
Whether the licensee may grant rights to others. Distribution and partnership models often depend on it, and licensors usually want some control over who receives sublicenses.
Improvements and grant-backs
Who owns each party's later developments, and whether the licensee's improvements are licensed back to the licensor.
Royalties and audits
How payment is calculated (lump sums, running royalties, minimums, and milestones) and how net sales are defined. Audit rights let the licensor verify reported royalties.
Ownership and chain of title
A party cannot transfer rights it does not own. Employee and contractor assignments, assignments recorded with the USPTO and the Copyright Office, and accurate IP schedules establish ownership in due diligence.
Assignment vs. license
An assignment transfers ownership of specified rights. A license permits specified uses while ownership may remain with the licensor. The substance of the agreement matters: an exclusive copyright license is itself a transfer of ownership of the licensed right under the Copyright Act.
Change of control
What happens to a license if a party is acquired. Licensors often want a termination right; licensees want the license to continue. It is easier to agree on this at signing than during an acquisition.
Termination
How the agreement ends and which obligations survive, such as accrued royalties, existing sublicenses, and confidentiality.
Intellectual property that cannot be transferred cleanly is hard to sell, license, or finance. Clean title, documented assignments, and consistent licenses make transactions possible. The guides and topics below cover the ownership questions that most often come up in deals.