3 Types of Licenses to Use as a Pivot in your Corporation

Frédéric Letendre

YULEX, Attorneys and Strategists, LLP


By Me Léa Psenak and Me Frédéric Letendre

Innovative corporations own valuable intellectual property. No matter its field of expertise, your corporation certainly owns methods, images, codes or inventions that are not exploited to their full commercial potential.

Did you know that some intellectual property rights can be licensed (rented) to other corporations? You can thus allow them, for example, to produce, reproduce, adapt or modify your corporation’s intellectual property according to certain conditions and limits (duration, scope, territory, price, etc.). This is what we call licensing an intellectual property right.

It is important to know that the licensor (the person who grants the license) retains full ownership of the rights it grants. In addition, the licensor may modify or revoke the licence and its terms and conditions if the use made of it is not suitable for the licensor.

Intellectual property licenses may be granted on an exclusive or non-exclusive basis. If the license is exclusive and relates to copyright works (e.g. codes, images, texts…), it must be evidenced in writing and signed (even electronically) by the owner of the rights or its representative. This will be the subject of another post on our blog.

As you can modulate the conditions of a license, its forms are practically infinite, but we present below 3 economic models of licenses that could be useful to you and your corporation.

Free license

The free license is a flexible license for which no royalties are received by the licensee (the person to whom the license is granted). However, this does not mean that this type of license is unconditional.

For example, our client, Shapeshift3D, is a corporation that manufactures customizable orthotics and prosthetics for various users. In response to the pandemic, Shapeshift3D’s management saw the opportunity to both help the global community and expand their business. Indeed, they adapted their software and solutions to enable the production of masks. They created an agreement to offer a free license to use their 3D mask printing software, allowing companies to try their software free of charge, but under certain conditions, replacing a traditional trial period.

The Creative Commons licensing system is another good example of free licenses subject to various levels of restrictive conditions.

Paid license

The fee-based license allows for revenue to be earned on the intellectual property rights by the licensor in exchange for the grant of certain rights to the licensee. It is generally payable in money (based on a fixed price, percentage of sales, etc.). This is called royalties.

To illustrate the concept of paid license, let’s take once again the example of our client Shapeshift3D. Although the corporation decided to offer a free license on the use of its software, the licensing agreement provides that Shapeshift3D will receive royalties (based on a percentage of sales) on all masks that would be designed using the software.

This way, they offer a free trial license, but they keep a lock on the production for 3D printing of the masks that could be developed following the use of the free license, while ensuring additional income.

Freemium license

The so-called freemium license is a hybrid between the free licence and paid license. Indeed, a corporation can offer software or a concept with basic functionalities for free, but charge a fee to users who would like to have access to more functionalities.

For example, the Zoom videoconference platform can be used under a free subscription that includes basic features (maximum of 100 participants per meeting and of 40 minutes per meeting with more than two participants). It is also possible to subscribe to a paid pro version, including more advanced features (no maximum meeting time, 1 gigabyte recording capacity, etc.).

In conclusion, take the time to ask yourself what intellectual property might be dormant in your business. Perhaps some of it could be licensed to third parties as a way to earn additional income.

Are you thinking of licensing some of your intellectual property rights, free, for a fee or as a freemium license? Would you like to have more information on licensing?

We invite you to contact the YULEX in order to guide you through the process in Canada or globally!

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