You may be interested in intellectual property (IP) license agreements if you’re a creator or business looking to monetize your work or if you’re seeking to utilize someone else’s intellectual property. There are different types of IP licenses, e.g. non-exclusive, exclusive and sole. Choosing the right type of license will depend on various factors such as your business model, market strategy and long-term goals.

Non-exclusive licenses

A non-exclusive license is the most common type of IP licensing arrangement. It’s also the least restrictive for a licensor. In this type of license, a licensor grants a licensee the right to use the IP, but also retains the right to grant the same rights to other licensees and exercise those rights themselves.

This allows the licensor to monetize their IP through multiple channels and benefit from a wider market reach. Licensees can often negotiate more favourable terms, because they aren’t competing for exclusivity. However, with the potential for many licensees to use the IP, the market may become saturated and potentially diminish the value of the license. Further, if there are many licensees involved, it may become more difficult for the licensor to maintain adequate oversight and exercise control over the use of its IP.

Exclusive licenses

In an exclusive license arrangement, the licensor grants the licensee the right to use the IP; no other party has the ability to use the IP – not even the licensor. This is the most restrictive type of license for a licensor.

Exclusivity often results in higher licensing fees, as licensees tend to be willing to pay a premium for the assurance that they are the only party with the right to use the IP. An exclusive license can provide the licensee with a competitive edge and enable them to dominate the market without the threat of competition using the same IP. This also means that the licensor is risking the loss of other potential streams of revenue associated with the IP license. Exclusive licenses may involve a longer term, which can tie up the licensor’s IP for an extended period.

Sole licenses

In a sole license arrangement, the licensor grants the licensee the rights to use the IP, while retaining the right to also use the IP. A sole license is essentially an exclusive license, except that the licensor can still use the IP.

This type of license can create a balanced revenue stream for the licensor, as they can monetize their IP directly while also receiving license fees from the licensee. Any concerns a licensee may have with respect to competition using the same IP can be greatly reduced, as the licensor is the only other party with the right to use the IP. To avoid conflict, the licensor and licensee will need to clearly detail permitted uses of the IP, particularly if they have competing interests.

The type of license granted under a license agreement is just one piece to the licensing puzzle. Parties must also consider a variety of other terms, such as duration, territory, specific uses of the IP, fees, transferability and revocability. As you navigate the licensing landscape, it is essential to consider the implications of each type of agreement and provision. If you have any questions about IP licensing or which arrangement is right for you, please contact the author, Jaclin Cassios or any member of Dentons’ Canada Intellectual Property group.