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Aleck Ncube

INTELLECTUAL Property (IP) commercialisation is an important way in which IP contributes to the knowledge economy. There are many forms of IP exploitation. 

For the purpose of this article, I will focus on IP Licensing and IP Assignment as types of agreements in which IP could be commercialised There are three main reasons to exploit or extract value from intellectual property: 

– To increase revenue through exclusivity or competitive advantage (income); 

– To increase recognition of products, services or name in the marketplace (goodwill); and 

– To establish a bargaining position in a business transaction, e.g. in raising capital, selling a business interest or resolving an intellectual property dispute (asset). 

Licence agreements allow one party to exploit the IP rights of another party against the payment of a royalty (for example, the right to make use of a patented technology or to perform a copyrighted work in public). 

There are three main forms of licences, namely exclusive, non-exclusive and sole. Licensing or assignment in technological innovation is concerned with the transfer of technology or use of intellectual property rights for profit. The essence of intellectual property lies in the “negative” right to exclude others from pursuing certain commercial activities with regard to specific objects, be that an invention, a design or some other intangible asset. 

“Positive” rights include the right to assign and licence the intellectual property. It also includes the right to use the property as collateral by, for example, mortgaging the intellectual property.

Licensing is more than simply royalty collection. It is a highly sophisticated business that requires expertise in negotiation, quality control, brands, marketing, retail and manufacturing processes, and contract law. 

A licence can be exclusive, non-exclusive, sole or a combination of these. The licensor grants the licensee the right to use or exploit intellectual property rights in exchange for the payment of royalties. Normally, a single product is involved and the licensee does not accrue any goodwill in the product or service licensed. 

The licence can be limited to specific acts, scope, geographical area, use or application. A licence in effect takes the form of a right to agree to the licensee’s use of the intellectual property, which would otherwise have constituted an infringement of the right. 

The licensing of registered intellectual property rights such as patents, trademarks and designs are clear. Trade-secret (or know-how) licences differ from licences of other intellectual property rights as they have other characteristics and difficulties. 

In the context of licensing, know-how is a component that can either co-exist with or be separate from other IP rights such as patents, trademarks and copyright rights. Know-how licences disclose how to fulfil certain tasks you would otherwise not be able to do simply because you do not know how to fulfil the tasks.

It generally goes hand in hand with confidentiality agreements (or non-disclosure agreements) or is often associated with a patent licence agreement in cases where you own patent rights and associated know-how and want to grant somebody else the right to develop and commercialise products.

In IP exploitation we have to include franchising. Franchising must be distinguished from licensing. For a company looking to expand, franchising and licensing are often appealing business models. In a franchising model, the franchisee uses another companies’ successful business model and brand name to operate what is effectively an independent branch of the company. 

The franchiser maintains a considerable degree of control over the operations and processes used by the franchisee, but also helps with things like branding and marketing support that aid the franchise. The franchiser also typically ensures that branches do not cannibalise each other’s revenues.

Under a licensing model, a company grants licences to other (typically smaller) companies to use its IP such as its brand, designs or business programmes. These licences are usually non-exclusive, which means they can be granted to multiple competing companies serving the same market. 

In this arrangement, the licensing company may exercise control over how its IP is used but does not control the business operations of the licensee. Both models require that the franchisee/licensee make payments to the original business that owns the brand or intellectual property. 

There are laws that govern the franchising model and define what constitutes franchising; some agreements end up being legally viewed as franchising even if they were originally drawn up as licensing agreements.

Assignment agreements provide for the transfer of IP rights from the IP owner to a third party (for example the assignment of copyright to a publisher of a literary work or the assignment of the right to an invention). A clear distinction should be made between licensing and assignment. 

Licensing takes the form of limiting the right of ownership of the IP owner, whereas assignment deprives the IP owner of proprietorship in the IP. A licence is a grant of some portion of the exclusive rights to another, an assignment is the transfer of ownership of IP to another. 

An assignment of intellectual property rights entails the transfer of the entire property right (or interest). Tentative rights to a work (the future work) may be assigned. 

Depending on the intellectual property rights in question, a part of, or an undivided share in the whole may be assigned. 

The assignment of intellectual property rights should in general be made in writing. It generally concerns the assignment of the full right, or a partial right in which case co-ownership will vest in the assignor and the assignee.

It is crucial for SMEs to appreciate that IP commercialisation is a significant source of revenue for enterprises. It requires a well thought through and implemented strategy where the IP development and exploitation are clearly aligned with business objectives and strategy. 

-Aleck Ncube is an intellectual property scholar based in Bulawayo. He can be contacted on Mobile: +263712374408 Skype: Matintas1 Twitter: @aleckncube Alternative E-mail: [email protected]