IP Licenses Are IP Leases

An intellectual property license is a lease for use of Intellectual property.  If attorneys and their clients understood this elemental principle, then licensing negotiations would often be less complicated, less fought over, and less expensive.

Certain words are used in the same manner in both types of agreements, such as the words “term”, “termination”, and “assignment.”  Other provisions are easy to translate:

Rent = Licensing Fee or Royalty paid to the IP owner

Premises = the Licensed IP, which must be defined in detail in both agreements

Sublet = Sublease

Trespassers = without the right to use the IP

Taking the analogy a bit further:

A. Both leases and licenses should clearly state there is no intent to transfer any rights of ownership in the property

B. IP licenses can be used to convert squatters or trespassers (infringers) into legitimately paying tenants (licensees)

C. IP licenses state which improvements (works for hire) attach to the property and are the IP owner’s (landlord’s) property

D. Licensing fees and royalties (rent) may have automatic or contingent increases in payments to the IP owner (landlord)

E. IP licenses should ensure licenses survive the sale or assignment of the IP owner’s rights, which are the equivalent of Non-Disturbance and Attornment in leases.

Unsurprisingly, there are several significant differences between the two agreements including

A. Tenants typically obtain the exclusive right to the premises (although they might share common areas with other tenants).  On the other hand, IP licenses need not be exclusive in that they can be limited by geographic territories or use in certain business sectors. 

B. Landlords are not required to register their properties with local government entities to obtain damages whereas IP owners need to register their IP with the U.S. Patent and Trade Office (USPTO) or the U.S. Copyright office to have certain rights and remedies.  

C. IP licensors typically do not require the prepayment of a security deposit.

This article certainly does not recommend you hire intellectual property attorneys to negotiate complex lease agreements or sales of real property.  Or vice versa. Instead, it is intended to remind attorneys and non-attorneys they should not be paralyzed or scared when reading IP license agreements because their general knowledge of real estate—through life or playing Monopoly—is more useful than they imagined.

David Seidman is the principal and founder of Seidman Law Group, LLC.  He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, and other issues. He can be reached at david@seidmanlawgroup.com or 312-399-7390.

This blog post is not legal advice.  Please consult an experienced attorney to assist with your legal issues.

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