The types of IP licenses divide along two axes, and the first one causes most of the trouble.
Exclusivity determines who else may practise, including whether the owner still can.
Scope determines what, where and for how long — field of use, territory, term, and which activities are permitted.
An exclusive licence normally excludes the licensor. Owners discover this after signing more often than they should.
By exclusivity
| Type | Licensee | Licensor | Third parties |
|---|---|---|---|
| Non-exclusive | May practise | May practise | May be licensed |
| Sole | May practise | May practise | Excluded |
| Exclusive | May practise | Excluded | Excluded |
Sole is the type people mean when they say exclusive and frequently fail to write.
If you intend to keep practising, say so. Either take a sole licence structure or write an express reservation into an exclusive grant.
Exclusivity drives price. An exclusive licensee gets the whole market and pays accordingly, which is why minimum annual royalties normally accompany it.
By scope
| Limit | Effect |
|---|---|
| Field of use | Confined to a defined application |
| Territory | Confined to named countries |
| Term | Fixed period, or life of the patent |
| Activities | Make, use, sell, offer, import — selectively |
| Volume or channel | Quantity or route to market |
| Sublicensing | Permitted or not |
Field-of-use limits turn one patent into several assets. A membrane patent licensed exclusively for water treatment can still be licensed exclusively for medical filtration, because the fields do not overlap.
Territory should match where rights exist. Granting worldwide rights on a US-only patent gives away future markets for nothing.
Activities can be split. A licence to make and sell but not to import is coherent and occasionally what the deal requires.
Structural types
| Type | Detail |
|---|---|
| Cross-licence | Mutual grants, frequently with little money |
| Sublicensable | Licensee may grant onward |
| Bare licence | Permission only, no other rights |
| Covenant not to sue | Functionally similar to a bare licence |
| Have-made rights | Licensee may use contract manufacturers |
| Compulsory | Imposed by law, limited circumstances |
Cross-licences resolve mutual exposure. Where two competitors each hold patents the other practises, exchanging rights is cheaper than two lawsuits.
Have-made rights are frequently forgotten. A licensee that outsources manufacturing needs them expressly, or its contract manufacturer is infringing.
Enforcement rights
| Licensee holds | Can sue? |
|---|---|
| Substantially all substantial rights | Generally yes, in its own name |
| Exclusive licence, rights reserved | Owner usually must join |
| Non-exclusive licence | No standing |
| Bare licence | No |
Address this expressly. A licensee expecting to enforce and discovering it cannot without the owner's cooperation has a problem at the worst possible moment.
Owners should think about it too. Granting substantially all rights can transfer enforcement control along with them. See patent license agreement.
Across IP types
| Patent | Trademark | Copyright | |
|---|---|---|---|
| Exclusivity structure | Same three tiers | Same | Same |
| Quality control | Not required | Required | Not required |
| Failure to control | — | Mark can be weakened | — |
| Duration | Patent term | Indefinite with renewal | Long |
| Field limits | Common | By goods and services | By medium and market |
| Registration of licence | Optional | Varies | Optional |
Trademark licences need quality control provisions. A licensor that does not control the quality of goods sold under its mark risks weakening the mark itself, which has no patent equivalent.
Do not blend rights into one clause. Patents, trademarks and copyright have different durations and requirements, and a single provision covering all three usually serves none well. See intellectual property agreement.
What each type leaves you holding
| Non-exclusive | Exclusive | Assignment | |
|---|---|---|---|
| Maintenance fees | Yours | Yours | The buyer's |
| Enforcement | Yours | Shared or transferred | Buyer's |
| Validity risk | Yours | Yours | Buyer's |
| Other licensees | Possible | None | — |
| Revenue | Multiple streams | One | One payment |
| Administration | Ongoing | Ongoing | Ends |
| Fee | Due after grant | Large | Small | Micro |
|---|---|---|---|---|
| First | 3.5 years | $2,150 | $860 | $430 |
| Second | 7.5 years | $4,040 | $1,616 | $808 |
| Third | 11.5 years | $8,280 | $3,312 | $1,656 |
| Total | $14,470 | $5,788 | $2,894 |
Licensing keeps every ongoing obligation with the owner. Only assignment ends them, which matters when a royalty stream is thinner than it looks.
Worked example: one patent, four licences
A patent on a coating process. The owner grants four non-conflicting licences.
| # | Licensee | Type | Field | Territory |
|---|---|---|---|---|
| 1 | Marine coatings firm | Exclusive | Marine hulls | Worldwide |
| 2 | Aerospace supplier | Exclusive | Aircraft surfaces | US and EU |
| 3 | Two industrial firms | Non-exclusive | Industrial equipment | US |
| 4 | Competitor | Cross-licence | All fields, defensive | Worldwide |
Why they coexist
| Check | Result |
|---|---|
| Do fields overlap? | No |
| Do territories conflict? | No — aerospace is limited |
| Can the owner still practise? | Only if reserved in 1 and 2 |
| Is asia still licensable in aerospace? | Yes — territory was limited |
Four arrangements from one patent, because every grant was scoped.
The reservation matters in licences 1 and 2. Without express language, the owner cannot practise in marine or aerospace applications at all.
The cross-licence costs no money and removes litigation risk, which is frequently its entire purpose.
Terms that accompany each type
| Type | Usually includes |
|---|---|
| Exclusive | Minimum annual royalties, performance obligations |
| Sole | Reservation for the licensor |
| Non-exclusive | Most-favoured-nation clauses sometimes |
| Field-of-use | Careful field definition |
| Cross-licence | Scope of mutual release, future patents |
| Sublicensable | Licensor's share of sublicence income |
Minimums accompany exclusivity for a reason. Without them an exclusive licensee can take the rights, do nothing, and block the market at no cost.
Field definitions are where disputes start. "Industrial applications" is not a field; it is an argument waiting to happen.
Choosing
| Situation | Type |
|---|---|
| Several possible users, want multiple streams | Non-exclusive |
| One partner, but you still practise | Sole, or exclusive with reservation |
| One partner takes the whole market | Exclusive, with minimums |
| Different applications, different partners | Field-of-use |
| Mutual infringement exposure | Cross-licence |
| Want out entirely | Assignment, not a licence |
Grant the narrowest licence that closes the deal. Every restriction you do not impose is an option you gave away for free.
If the ongoing burden is the problem, sell. A licence never ends the fees, monitoring or validity risk. See ip license.
When licensing stops making sense
| Signal | Meaning |
|---|---|
| Royalty barely exceeds the next fee | Thin |
| Third fee approaching at $8,280 | Recalculate |
| Reporting requires chasing | Administrative drag |
| Remaining term short | The stream is finite |
| Ipiry Patent Survival Curve v1.0 | Rate |
|---|---|
| Survive the 3.5-year fee (2022 cohort) | 85.8% |
| Survive the 7.5-year fee (2018 cohort) | 64.6% |
| Reach full term (2014 cohort) | 41.4% |
| Abandoned before full term | 58.6% |
Computed from 27,273,654 USPTO maintenance fee records covering 8,262,336 US utility patents — see the patent survival curve.
Types of IP licences: the checklist
- Decide exclusivity first. It determines whether you can still practise.
- Remember exclusive normally excludes the licensor. Reserve rights expressly.
- Use sole where you intend to keep practising.
- Limit the field of use. It turns one patent into several assets.
- Match territory to where rights actually exist.
- Specify which activities are licensed — make, use, sell, offer, import.
- Address have-made rights if the licensee outsources manufacturing.
- Define enforcement standing expressly, not by implication.
- Include quality control in trademark licences. The mark depends on it.
- Grant the narrowest licence that closes the deal, and consider selling if the ongoing burden is the real problem.