The use of Intellectual Property (IP) protection has grown tremendously over the past few years. This is largely due to the growth of technology and the changes demonstrated by the million to billion dollar award settlements for infringement of IP rights. While purchase and use of a patented product for its intended purpose includes an implied license from the patent holder, there may be some unintended consequences if the full extent of patent claim language is not understood. Use of the patented technology, for its intended purpose does give a cause for a suit. However, if you make modification to the patented device outside of the scope of the claimed invention, you may cause yourself some legal problems.
Unauthorized use of copyrighted materials, either wholesale copying or copying of just a portion, or the making of a derivative of the copyrighted work, may subject you to a lawsuit with a possible injunction or monetary damages. Copyrighted material from another should not be used without their permission. As a caveat to this, there are fair use exceptions in the copyright laws. However, it would be an extremely rare situation for a business to fall into one of the fair use exceptions. Unlike other forms of intellectual property, trade secrets of another party are freely usable, provide the information was not stolen or obtained by some other illicit means.
Likewise, the intended or unintended use of a portion of another party’s trademark may create a problem for companies. Copyright and trademark lawsuits are much more common that patent infringement. Extreme caution should be taken when using portions of another party’s trademark.
Unlike other forms of intellectual property, trade secrets of another party are freely usable, provide the information was not stolen or obtained by some other illicit means.
If you are using the products, wording, descriptive identity or other type of IP of another, a search should be made to determine if any of these items is covered under some form of IP. If you are planning to use the work of another, it is recommended that you get their authorization. A licensing agreement may be your easiest means for resolving the right to use the intellectual property of another. One way to make sure is to do a search to determine if the product is covered under some form of intellectual property. This search is termed "Freedom to Operate" ("FTO"). This search will allow you to identify what kind of licensing agreement you would need to negotiate.
It may then be a good idea for you to contact the person in the company who is responsible for licensing out rights in company products. It is critical that you do this very carefully and strategically. Ask yourself, do you know anyone in that company who you could first approach casually to assess if this company is interested in licensing rights in its product. Based on this individual’s response you may want to further develop your strategy of how much to disclose to the company. If the company agrees to sign non-disclosure agreement it is the first sign that this company maybe interested in licensing. This company will then give an outline of the license terms, "a term sheet", "letter of intent" or a "heads of agreement."
An issues to consider in a licensing agreement is do you want a non-exclusive or Exclusive license. Under a non-exclusive license, the licensor can sell the same rights to others. On the other hand, under an exclusive license, the licensor provides exclusive rights to one licensee. The determination for giving exclusive or non-exclusive rights in a license agreement depends on multiple factors such as the type of IP, type of the product or service, etc. Other factors include- length of the agreement (term); rights to modify or combine with other products, (if you want to use the IP to make a combination product with your own product); non-disclosure of confidential information; prohibited use; assignment, distribution of product, diligence, transfer and sublicense rights; acceptance, testing and training; warranties; limitations on the licensor’s liability; support and maintenance services; insurance, indemnity for liability, indemnity for infringement; enforcement of remedies; and termination.
On a financial level, the company will ask for royalties and an upfront license fee at a minimum and patent cost reimbursement and patent maintenance costs. Other financial terms could include equity, annual maintenance fees, and milestones.
A system for tracking license agreements is necessary for any business. It will allow you to maintain only those licenses that you use or anticipate using. This will keep your licensing expenses down.
http://www.lesi.org/Article/About_LESI.html - Website of the Licensing Executive Society International.
http://www.lesi.org/Article/Resources/Licensing_FAQs.html - Frequently Asked Questions on Licensing and Technology Transfer at the Licensing and Executive Society International Website