Considerations in Intellectual Property and Licensing

This is an area where a qualified expert professional is essential to determine the type of intellectual property protections necessary, to take steps to assure these protections, and if necessary, to take actions to protect your property if another infringes on your rights. This outline is not intended as a substitute for qualified legal advice, but it is merely a guide to some basic considerations in intellectual property and licensing.

Licensing Basics

Licensing Basics

  • What is licensing: Licensing is a form of marketing and brand extension which has proliferated over the last decade. Licensing helps manufacturers use a brand identity to create immediate consumer awareness and reinforce brand awareness.
    • Licensing is a grant of permission to use someone else’s intellectual property. Essentially it is leasing a legally-protected entity, such as a name, likeness, logo, graphic, saying, signature, character, or combination of those forms of property that are trademarked or copyrighted. Generally a contractual arrangement is made between the manufacturer and the owner or agent of the trademarked or copyrighted property. The manufacturer will pay the owner a royalty for the use of the property, which is usually a percentage of the licensee’s sales of products. Generally a guaranteed minimum royalty is included, which will be paid as an advance.
  • Benefits of Licensing: For licensing to be successful, it must benefit both the licensee (the party granted the license) and the licensor (the owner of the intellectual property). The benefits are:
    • Expanding market opportunities without large capital expenses. For example, a licensed product can enter markets it would not have served without the license. By using an established brand a manufacturer can use brand identity without the investment generally required to launch a product and build up the brand recognition.
    • Licensing can increase the market perception of your product. If the licensor has a good reputation the consumer will associate positive feelings with the licensed product.
    • A license can benefit the licensor by increasing brand awareness. A firm may have the resources to exploit its intellectual property through only one product, but the intellectual property may be applicable to other products or services. When a licensor's trademark is licensed, the licensee's marketing efforts benefit the licensor's reputation and goodwill (as long as the licensee maintains quality in product, service, and sales.)
    • Licensing may allow a firm to achieve some degree of control over its own innovations and also over the direction of the industry.
  • Types of Licenses:Generally most licenses relate to the following categories; character and entertainment licensing; corporate trademark and brand licensing; fashion licensing, sports and arts licensing. There are various types of licenses that may be granted:
    • Nonexclusive License: The licensor may grant the use of the trademark to more than one licensee without restrictions.
    • Exclusive license: This type of license can, but may not necessarily mean that there is only one licensee. The exclusive aspect may limit the license to a geographical area, a specific product category or for limited period of time. One type of exclusive license would be for product sales outside the United States.
    • Patent license: This is usually permission to sell, produce or use a patented design, product or process. Many inventors will license their patent rights,but not the invention, to an existing manufacturer. Note to do this you must have a “patent” or have a “patent pending."
    • Copyright License: Unlike other licenses a copyright license is not necessarily a mutually agreed upon contract, but a grant of permission to do something.
    • Trademark or service mark license: This is a grant of permission by the owner of a trademark for another to use the mark. An example of this is the APPA logo, which is available to APPA members for use. The APPA logo is trademarked and before using the logo, APPA asks it members to agree that to use the logo they will abide by certain conditions.By acknowledging that a member will use the logo as specified, the member is entering into a licensing agreement, with the cost of licensing being an APPA member in good standing and agreeing to the licensing rules for usage.
      • A trademark license is different from other types of licenses because the trademark owner must exercise some control over the nature and quality of the goods and services on which the license is used. If the product does not have adequate quality controls the trademark could become worthless. Quality controls generally require the licensor to supervise the goods to the extent that they can ensure quality.
      Trade Secret License: This license grants permission to use or sell a product, design or process using a trade secret. It is important to control the methods used to ensure confidentiality when granting this type of license. There is also a know-how license that refers to usage of technological information.
  • The Licensing Agreement: The terms of a licensing agreementare negotiated based on the individual arrangement.
    • Some typical provisions included in these agreements are:
      • Subject matter of the agreement: This refers to what type of license is being granted;
      • Granting of rights: What exactly is being licensed;
      • Licensor’s obligations: This may include assistance, support, training, cooperation;
      • Licensee’s obligations: This may include guarantees including financial guarantees, secrecy issues, quality control issues, costs;
      • License fee: This fee is usually paid to licensor on signing the agreement;
      • Royalty: This is an ongoing share of proceeds paid to the licensor. This may be a percentage of sales or amount per unit sold. Many of these agreements have a minimum royalty amount;
      • Term: How long the license agreement will last;
      • Exclusivity: Defines whether the agreement is exclusive or nonexclusive, and the manufacturing and marketing area of license;
      • Termination: This defines how either party may terminate the agreement;
      • Guarantees: The licensor generally will not guarantee the results of using the license, the licensee may guarantee a minimum sales level, may be required to provide warranties, and may be liable for any defects;
      • Sublicense: This will state whether a sub-licensor may stand in the shoes of a licensee and fulfill the obligations of the agreement.
  • Some other considerations to look at before negotiating a licensing agreement, include:
    • Is the copyright, trademark, patent, or trade secret valid?
    • What is the value of the intellectual property? The market valuation of the intellectual property can often be done with modeling techniques. The value of intellectual property is often independent of its cost.
    • Which entity is responsible for customer service and warranty coverage?
    • Which entity is responsible for enforcing any infringement on intellectual property rights?Which entity pays for that enforcement action?
    • Are there specific performance targets that must be achieved by the licensee?
    • May the licensor audit the licensee?
    • What the licensee must or can do to promote the licensed product.
  • Additional Information
Protecting Your Intellectual Property

Protecting Your Intellectual Property

  • Intellectual property has been described as the intangible product of creativity.  
  • There are different routes to protect your intellectual property, depending on the type of property. For some types of intellectual property, a protection is granted by registering it with the government, for others the protection is generated merely by usage. In any case, the owner of intellectual property must be vigilant in protecting their rights. Generally there are four types of intellectual property protection.  

    APPA has a web page which discusses how to protect your intellectual property at trade shows in the US and overseas.


  • Copyright: A copyright is granted to authors for individual works of authorship and other forms of creative expression. This includes literary, dramatic, artistic and other intellectual works both published and non-published. The copyright owner has exclusive rights to reproduce the work. Copyrights are registered with the Copyright Office of the Library of Congress.
    • Patent: A patent is a grant of a property right for things and processes that are useful in the real world. The right is for 20 years after the date on which an application is applied for. During that period the inventor may exclude others from making, using or offering for sale, or selling the invention. The legal description of the invention is the patent’s claim. The US Patent Office will review the patent and determine whether the invention is one that is new, before accepting the patent.
    • Trademark: A trademark is a word, name, symbol or design or slogan which distinguishes the products of one company from another.A trademark must be distinctive and is linked to a specific product or company. A “service mark,’’ is similar to a trademark and generally refers to the source of a service and not a producr.
      • Trademark protection is created through the use of the mark, or by filing the mark with the US Patent and Trademark Office.If you file your mark you can use the ® symbol. If not, you may still have trademark protection but must use the symbol “TM” (trademark) or “SM” (service mark).
      • Infringement:To prove that someone is infringing on your trademark, you must show that the use of a mark has created likelihood-of-confusion about the origin of the goods or services. The factors in determining likelihood of confusion are:
        • The similarity in the overall impression created by the two marks (including the marks' look, phonetic similarities, and underlying meanings);
        • The similarities of the goods and services involved (including the marketing channels for the goods);
        • The strength of the mark;
        • Any evidence of actual confusion by consumers;
        • The intent of adopting its mark;
        • The physical proximity of the goods in the retail marketplace;
        • The degree of care likely to be exercised by the consumer; and
        • The likelihood of expansion of the product lines.
        • The most common form of relief granted by the courts for infringement is an injunction barring the further use of the mark. For a registered trademark, attorneys’ fees may also be awarded and rarely, monetary damages
        • Trade Secret: Trade secret protection can protect confidential information from improper appropriation and is generally enforced by the states.To consider whether something is a trade secret, courts will look at how secret the information is, the efforts made to protect the secret, the value of the information, and the amount of money or effort involved in creating the secret. The higher the cost in developing the trade secret, the more likely it will be considered a trade secret. A trade secret program, including employee confidentiality requirements to ensure this secret is protected is additional evidence of the intent to keep the information a secret.
        • A good source of information on the different types of protections offered for intellectual property can be found at The United States Patent and Trademark Office.
        • Overseas Goods That Infringe on Intellectual Property Rights: The increase in international trade has brought with it benefits, as well as a flood of pirated and counterfeit goods into the U S markets. This is a costly problem exacerbated by the fact that some countries where these goods originate are more lax than others in enforcing intellectual property rights. What options does a U S company have in enforcing their intellectual property rights?
        • File a civil action for infringement in federal Court against the manufacturers, importers and sellers of these products. The court may order the U S Marshall to seize and impound the infringing goods, or order injunctive relief preventing the sale of the goods. A problem with this method is that it may be difficult to obtain jurisdiction over all counterfeiters in a single court. Also, it may take quite some time before a permanent remedy is decided, during which time the infringers will continue benefiting from the use of the property, or set up shop in a different location.
        • International Trade Commission (ITC): The ITC is a federal agency with jurisdiction over several areas of international trade, including enforcing international property rights at the U S border and determining injury in anti-dumping and countervailing duty investigations. The ITC can direct the U S Customs and Border Patrol (CBP) to exclude entry for a product or item that infringes on intellectual property rights. CBP can seize and impound infringing goods. The ITC, under the authority of section 337 of the Trade Act of 1930 conducts formal investigations and determines whether the owner’s rights have been violated. For more information access the ITC’s Website.
        • US Customs and Border Protection (CBP): If a copyright or trademark is registered with a U S agency, the CBP can seize and impound goods pursuant to a 337 exclusion order by the ITC. First the owner of the registered copyright or trademark must record the registered mark or copyright with the CBP. Working with the ITC, if the CBP has specific knowledge of the arrival port of the infringing goods, it may seize and impound the goods. The Customs and Border Patrol Web site includes information on enforcement of intellectual property.
        • U.S. Customs and Border Protection’s Office of International Trade has developed a new online trade violation reporting system called eAllegations to provide concerned members of the public a means to confidentially report suspected trade violations to CBP.