Every technology (be it a product, material, compound, substance, program or service) has associated (registered or unregistered) intellectual property rights. It is important to identify what these rights are for the purposes of licensing. Intellectual Property is a basket of different rights. There is no precise definition of "intellectual property" but it can be divided into the areas of patents, trade marks, industrial designs, copyright and confidential information. Whether collectively or individually, these rights are important as they are not only the product of its creators but are valuable intangible assets that can be financially exploited. In addition if corporate structures are arranged properly, the ownership of intellectual property can result in generous tax incentives such as the patent income exemption as well as a tax credit for Research & Development expenditure. It is beyond the remit of this guide to examine these incentives however you will find guidance on this topic in the Tax Guide available here. The individual intellectual property rights can be summarised as follows:

• Patents - relate to inventions producing a technical result. Inventions can be registered if they are new, inventive and capable of industrial application. A patent gives the inventor a monopoly over the patented invention for 20 years.
• Trade Marks - are concerned with brand identity. They can be distinctive words, slogans, marks or other features which connects, in the public's mind, a link between the particular products/services and the Company. Like patents, trade marks give its owner exclusive rights to the mark for 10 years (which can be renewed indefinitely for periods of 10 years).
• Industrial Designs - are concerned with the appearance and features of a product (whole or in part) such as the shape, configuration, texture or materials not dictated by functional considerations. A registration gives exclusivity to the owner which lasts for 5 years (up to a maximum period of 25 years).
• Copyright - is concerned with (amongst others) original literary (including software), musical, dramatic or artistic works. Depending on the type of work, copyright will expire 70 or 50 years after the death of the author.
• Confidential information - concerns confidential business information that companies do not want to share with customers, competitors or any third party.

Why License Technology?

There are a number of factors which may influence whether a company licenses ("the Licensor") its technology to a third party:

• The technology may be applicable to a number of industries which do not fit strategically within the owner's business. Alternatively, the owner may not have enough resources (financial or otherwise) to exploit all of the potential markets for the technology.
• The owner may not be familiar with a new market and may wish to take advantage of a third party's expertise.
• It may be cheaper and more efficient for a third party to manufacture a product in a local market than for the owner to distribute the product. In addition, the owner may not have the distribution network to sell the product in a new market.
• The owner may be constrained by other factors such as exchange controls or import restrictions.

Sample Case Study Company A

Company A (an international computer manufacturer) has an extensive patent portfolio. It utilises a downstream licensing strategy to enable others to commercialise the patented technology. This has resulted in a significant portion of Company A's income arising from the licensing its assets. However, Company A also licenses-in some patents for its planned products (particularly if there is any possibility of their infringing the intellectual property rights of third parties). From the point of view of the party receiving the technology ('the Licensee'), it can use the technology developed and owned by the owner without having to carry out its own independent research and development. It therefore gains an advantage over its competitors as it can get to the market a lot quicker.

Step 1 - Create a Strategy |Step 3 - Evaluation of Proposed Venture