The Popularity of Licensing does not Cease to Grow

Authors: Monika Juskaite, Trademark Consultant at METIDA,  Violeta Sutkiene, Associated Partner, Head of the Trademark and Design Division at METIDA

Screen Shot 2014-11-27 at 19.27.36How to use company’s resources and find ways to increase the income is one of the main challenges that the companies face nowadays.

Companies need to look for innovative and creative ideas in order to successfully introduce their new products to the market or maintain the place of the existing ones. The right to use the existing products is protected under the intellectual property (IP) law, which among other things, entails licensing. This form of protection has become popular and can help companies improve their position in the market.

The annual ranking of the world’s largest owners of intellectual property, compiled by License! Global portrays the rapid growth of the licensing. Specifically, in 1998 barely 50 IP owners were included into the ranking, whereas this year the number has reached 150. That the ranking includes prominent companies such as Disney Consumer Product, Warner Bros, Discovery, Ford and other trademarks known worldwide not only reflects the increasing popularity of licensing, but also its importance in the retail sales.

For the licence agreement to become effective, the agreement must be signed between two or more parties indicating which rights are to be granted to the licensee by the licensor. This type of contracts has existed since the end of 1700, when the first copyright was granted and the first patents were issued. The effect of the licenceagreement is subject to the four provisions:

  • A licensor is required to have the ownership rights to an IP object or to get the owner’s consent to issue the license;
  • IP must be legally protected or comply with the protection requirements;
  • The licence agreement must indicate which IP rights are granted to the licensee;
  • Payments or other type of settlement must be clearly described in the agreement.

The majority of companies have accumulated not only a large collection of trademarks, but also a pile of patents, utility models, know-how and other IP objects. All of these objects could be licensed. In fact, companies may profit from licensing all or only part of their IP objects due to the many reasons.

Generally, the trademark proprietor grants the licensee with the right to use the IP object belonging to the owner under the ownership right. In this way the owner seeks to take advantage of the larger licensee’s production capacity, the broader spectre of the realisation market, the better knowledge of the local market. While the licensor is making use of the licensee’s strong points, the licensee is obliged to encourage the users to buy the products labelled with the owner’s trademark. The examples of this type of trademarks are Mickey Mouse, Barbie and The Lion King.

Another positive aspect of licensing could be that the licence agreement gives access to the already known technologies and products which are labelled with well-known trademarks, while at the same time new products are rushed into the market. This helps retailers to build the foundation of their enterprise and establish their place in the market on time.

Hence, the licence agreement is one of the best ways to protect your IP object. This can be also reflected in the amendments of the law on trademarks that came into force on 1 June 2013. The amendments cancelled the requirement to register licence agreements of trademarks in order for them to have an effect in this way simplifying the licensing conditions for the third parties.

If you don’t have enough time, but are thinking of purchasing a licence of some IP object, we recommend you to check . This is a place where future and current proprietors of trademarks, designs and inventions meet each other.

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