Selling and licensing product rights

If your company lacks the resources to develop a product or manufacture a new one, you should consider selling the rights to the product to another company. First, however, your company must protect the product with a patent or trademark, for example.

If you want to give up your rights to the product entirely, sell the purchaser all the rights to the product. If you only wish to part with some of the rights, for example, manufacturing and selling, sell the rights in part, i.e. license the product. 

If your company decides to sell all the rights to a product, look for a purchaser that has the resources to develop the product further. Draft all the documents linked to the sale carefully. If necessary, use the services of a patent agent or other legal experts. Think first how you will convince the purchaser of the value of the rights to the product and justify the price you are asking for them.

Always conclude a written agreement with the purchaser on the sale. When the bill of sale is drawn up, your company will no longer own the product. Responsibility for anything connected with the product, such as commercialisation, development and distribution, will have passed to the purchaser.

Licensing means that your company gives the licensee certain rights to its products against payment. The licensee often receives the right to use a product when it can manufacture and sell a product under the licensing arrangement for your company’s product. However, the product remains your company’s intellectual property. If the licensee wishes to modify the product, it must ask your company for permission to do so.

Always conclude a written agreement on licensing, one that is as unambiguous as possible. It is a good idea to use a patent agent or other legal experts when entering into the agreement.

Agree in the licensing agreement on how the rights are to be used and the relevant geographical coverage. Also include in it the duration of the agreement and the terms and conditions of termination.

Also agree what payments the licensee needs to make to your company for the rights to the product. The most common type of payment is a royalty, which is a proportion of the price at which the licensee sells the product. Payment can also take the form of, for example, an annual fee and various one-off payments.

Your company may use the licensing of its service product to grow its business, for example. If your company wants to license the service, pay special attention to preserving the service brand. Carefully plan beforehand how you can best guarantee the quality of the service you are licensing. Think about what would be the most appropriate way to license the service.

Franchising is the most highly developed form of licensing a service. It involves your company commercialising its business concept in its entirety (branding) and licensing it to other companies. All the companies to which you license the service follow the same model licensed by your company to them. For example, the restaurants in the same franchise chain usually look the same and serve the same food. The service experience in them is therefore the same, regardless of the place.

If your company has licensed a service, check carefully that the licensees deliver the service properly. Develop the service and train the licensees continuously, to ensure that the service remains competitive and to establish brand consistency.