In a business world full of innovation, licenses play a very important role.
Licenses allow companies to give permission to other parties to use their valuable assets under certain conditions.
By understanding licensing, you will be better prepared to face business challenges and be able to maximize the potential of your assets.
Let’s start by understanding what a license is license agreement and how it is regulated in law.
What is it License Agreement?
License agreement is a legal agreement that gives the right to a certain party (licensee) to use an asset owned by another party (licensor) within a predetermined period of time and conditions.
These licensed assets can be intellectual property, such as copyrights, patents, trademarks, or technology.
This license allows the licensee to utilize the asset without necessarily owning full rights to it.
What Article is the license regulated under?
As mentioned earlier, licenses are regulated in several different articles depending on the type of intellectual property being licensed.
For copyright, licenses are regulated in Articles 80 to 83 of Law Number 28 of 2014 on Copyright.
Meanwhile, for patents, it can be found in Law Number 13 Year 2016 on Patents, specifically in Articles 73 to 80.
Law Number 20 Year 2016 on Trademarks and Geographical Indications also regulates trademark-related license agreements in Articles 42 to 45.
These three laws provide guidance on how the license should be conducted, the rights and obligations of both parties, as well as the procedures to be followed to ensure that the agreement is legally valid.
What are the Types of Licenses?
Licenses are not limited to just one form.
In general, there are several types of licenses that you need to know, namely:
1. Exclusive License
The licensor grants exclusive rights to the licensee to use a particular asset.
In this case, the licensor cannot grant the same license to another party.
2. Non-Exclusive License
The licensor can still grant usage rights to parties other than the first licensee.
This is a common license type used in the technology and software industries.
3. Sub-License
In this type, the licensee gets the right to grant the license to a third party, with the consent of the licensor.
4. Limited License
The rights granted are limited to a specific time, territory, or purpose.
For example, a license that is only valid in one country or for one type of product only.
Understand the different types of license This will help you choose the shape agreement or cooperation that best suits your business needs and goals.
When should a license be used?
Licenses should be used when you want to allow others to use your assets without losing ownership of them.
For example, if you have a new technology that you don’t want to sell but want another company to utilize.
In addition, licensing can also be used as a strategy to expand market reach without having to make a large investment, as the licensee will be responsible for producing or selling products in a particular region.
Licenses are also very useful when you want to accelerate the adoption of a new product or technology in the market, increase revenue through royalties, or even for the purpose of legal protection of intellectual property rights.
Advantages of Using a License
Using license agreement There are various benefits for both the licensor and the licensee.
For the licensor, the main advantage is being able to monetize the assets owned without having to sell or lose control of the assets.
Royalties received from the license can be an ongoing source of passive income.
In addition, licenses allow you to enter new markets with less risk, as the licensee will be responsible for operations in the region.
On the other hand, licensees benefit from access to established technologies, products or brands, so they don’t have to start from scratch.
Difference between License, Patent, and Royalty
Many people often get confused between licenses, patents, and royalties.
The three have different concepts although they are interrelated.
A patent is an exclusive right granted to inventors for their invention, which protects the invention from being used by others without authorization.
Meanwhile, a license is a permission granted by a patent or copyright holder to another party to use the invention or work.
Royalties on the other hand are payments received by the owner of a right (such as a patent, copyright, or license) as compensation for the use of that right by another party.
In other words, if you own a patent and license it to another company, that company will pay you royalties as a form of compensation for using your invention.
Examples of Licenses in Practice
For example, one common form of license is a software license.
When purchasing softwareYou are not actually buying the software itself but rather buying a license to use it.
How to make License Agreement
Here are some steps you need to follow in creating a license agreement:
1. Identify the Asset to be Licensed
The first step is to clearly identify the asset to be licensed.
Is it a copyright, patent, trademark, or specific technology?
Make sure the asset is legally protected so that you can license it safely.
2. Determine the License Type
After identifying the assets to be licensed, the next step is to determine the type of license to grant.
Do you want to grant an exclusive, non-exclusive, or perhaps a limited license?
3. Formulate Rights and Obligations
This agreement should include the rights and obligations of both parties.
For example, the right of the licensee to use certain assets for a certain period of time, as well as their obligation to pay royalties.
4. Specify Terms and Conditions of Use
The terms and conditions of use are a crucial part of the license agreement.
Bagian ini harus mencakup hal-hal seperti:
- License Term
- Usage Area
- Payments and Royalties
- Usage Restrictions
5. Termination Clause
Termination clauses set out the conditions under which the agreement can be terminated.
This could include a breach of terms by either party, a change in ownership of the asset, or other mutually agreed reasons.
6. Negotiation and Final Settlement
Once the agreement is drafted, both parties should go through a negotiation stage to ensure that all the terms listed are mutually agreed upon. When both parties reach an agreement, make sure the agreement is signed by all parties and if necessary registered at the relevant institution according to the type of asset being licensed.Understand license agreement and its various aspects are essential to protect and utilize your intellectual property.
If you need further assistance in creating these agreements, Contract Law’s team of experts is here to help!
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You can visit our Agreement Services – Contract Law, to know the details of the service.
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