Licensing Agreement Template UK

Types of Licensing Agreements

A licensing agreement grants permission to use intellectual property — such as patents, trademarks, copyright, or software — under defined terms. The type of licence determines the scope of rights granted, from exclusive arrangements to broad non-exclusive permissions.

• Exclusive licence: only the licensee can use the IP, even the licensor is excluded
• Sole licence: the licensee and licensor can both use the IP, but no other licences will be granted
• Non-exclusive licence: the licensor can grant the same rights to multiple licensees
• Sub-licensing: whether the licensee can grant rights to third parties must be explicitly addressed

Commercial Terms and Royalties

The financial structure of a licensing agreement varies widely depending on the type of IP, the market, and the parties' relative negotiating positions. Common models include flat fees, royalties on revenue, per-unit fees, and hybrid structures.

• Royalties are typically 3-10% of net revenue for patent and trademark licences
• Software licences often use per-seat, per-user, or subscription-based pricing models
• Minimum royalty guarantees protect the licensor if the licensee underperforms
• Audit rights allow the licensor to verify royalty calculations, typically once per year with reasonable notice

Protection and Enforcement

A licensing agreement must protect the IP from misuse and define what happens if either party breaches the terms. The licensor needs assurance that the IP will be used correctly and the licensee needs certainty about the scope of permitted use.

• Quality control clauses ensure the licensee maintains standards that protect the IP's value
• Define the territory and field of use — geographic and market restrictions on where and how the IP can be used
• Include IP infringement provisions: who is responsible for enforcing against third-party infringers and who bears the cost
• Termination for breach should include a cure period for remediable breaches

Key Takeaways

• The type of licence — exclusive, sole, or non-exclusive — fundamentally determines the value and risk of the arrangement.
• Royalty structures should include minimum guarantees and audit rights to protect the licensor's interests.
• Quality control and territory restrictions are essential to protecting the long-term value of the licensed IP.