THEORETICAL ASPECTS IN THE FORMATION OF
PEDAGOGICAL SCIENCES
International scientific-online conference
100
LICENSE AGREEMENTS AND THEIR BENEFITS
Nurbek Bahriddinovich Toshkanov
PhD Student of Tashkent State University of Law
https://doi.org/10.5281/zenodo.12771187
Licensing, one of the most common contractual and legal forms of
commercialising intellectual property, is essential in law enforcement.
According to European experts, most companies use licensing as a
commercialisation method. Its success rate is higher than that of other methods
(for example, rights transfer to intellectual property objects).
A license agreement is a long-term scientific and technical cooperation
agreement concluded between the owner of intellectual property and another
competitor who does not own this intellectual property but needs to use it
effectively in its activities.
Today, two main types of licenses are distinguished based on the number of
licensees allowed to use the licensed intellectual property. A permit may be
exclusive or (simple) non-exclusive, as described below:
1) Exclusive license - in which only the sole licensee has the right to use the
intellectual property, and the intellectual property owner cannot use it. Only the
licensee or a person authorized by the licensee can use the invention in an
absolute license.
2) Simple (non-exclusive) license - gives the owner the right to provide
additional permits to third parties while retaining the right to use the
intellectual property. In this case, several licensees and owners will have the
right to use the intellectual property.
3) Sole license - allows the licensee to use the intellectual property and
prevents the granting of additional licenses. However, in an individual license,
the intellectual property owner can also use the intellectual property
1
.
In particular, from the point of view of the licensee, licensing allows to
achieve the following goals:
a) helps the company achieve financial savings in research and
development (R&D) and effectively eliminate the risk of losing valuable
resources (“cul-de-sac”);
b) ensures that the company’s product range is in the leading positions,
especially in conditions where the product circulation period is short, and there
is a risk of falling behind competitors; such provision is essential;
1
Ned T. Himmelrich. A Sole License and an Exclusive License Are Not the Same // URL:
https://www.gfrlaw.com/what-we-do/insights/sole-license-and-exclusive-license-are-not-same
THEORETICAL ASPECTS IN THE FORMATION OF
PEDAGOGICAL SCIENCES
International scientific-online conference
101
c) the enterprise can also sell the license to companies working in a
completely different field, which is not included in the field of competition. For
example, an enterprise that has its patent for a rotary grinder can sell it not only
to agricultural producers but also to construction organisations and other
similar organisations;
d) helps the company to rapidly develop (expand) without spending
significant funds and time on research and development (R&D);
e) an effective license agreement can catalyse the formation of a long-term
strategic partnership between the licensor and the licensee;
f) A non-exclusive license is required if the company’s product violates or is
likely to violate the patent rights of other persons. In such cases, the company
may be interested in obtaining a non-exclusive license under the patent to
eliminate the possibility of infringement
2
.
Licensing has the following advantages from the licensor's point of view:
a) licensing is a necessary source of income that helps the company
continue to create, manufacture and sell a new product;
b) from a marketing perspective, intellectual property licensing can
increase customer awareness by entering new countries and markets;
c) from a strategic point of view, licensing allows the company to bring the
product to the market without spending on the necessary tools and distribution
networks that are usually required;
d) overseas licensing helps to overcome the obstacles associated with
negotiating the decisions of local authorities and allows people who are familiar
with the local market to get the maximum benefit from the licensed product;
e) licensing may have an advantage in the formation of strategic relations
between the licensor and the licensee that may lead to license agreements or
partnerships in the future;
f) In cases where one party or both parties violate the intellectual property
rights of other (third) parties, licensing is considered a means of preventing
litigation. A competitor can become a partner at the same time to share mutual
profits.
Standard aspects and advantages of licensing are as follows:
a) a license (exclusive or indirect) may ultimately bring more money than a
rights transfer. If the value of the product increases due to the success of the
license and inflation, the revenue from the permit can increase several times
over the 20 years compared to the sales value at the time of the license;
2
Intellectual Property Commercialization: Policy Options and Practical Instruments. United Nations, Geneva
(Switzerland), 2011. https://unece.org/fileadmin/DAM/ceci/publications/ip.pdf
THEORETICAL ASPECTS IN THE FORMATION OF
PEDAGOGICAL SCIENCES
International scientific-online conference
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b) the licensor can quickly restore the right to intellectual property upon
the expiration of the license (if it is not a perpetual license) without extending
the license term;
c) if the potential licensee has already started selling a product that may
infringe intellectual property rights, such infringement may not go to trial;
d) if the right to improve the property is agreed in the license with the
patent owner, the patent owner may have a permit or property right to any
improvement made by the licensee;
e) License terms (both absolute and indirect) may be flexible to benefit both
parties. The license may be limited by territory or the specific type of product
the patent applies to.
f) the licensee may be required to maintain the patent under the contract
and to take direct responsibility for patent invalidity and violations; such a
requirement is often found in an absolute license;
g) Licensing is an effective method of technological exchange. For example,
if the trademark is distributed and the licensee fully fulfils the terms of the
contract, the enterprise may gain business reputation, popularity and other such
additional bonuses;
h) several non-exclusive licenses may pave the way for nationwide
marketing of the invention
3
.
Some of the advantages of absolute licenses are:
a) negotiations are conducted by only one party. The main advantage of an
absolute license is that negotiations are conducted only by one party who
assumes full responsibility for the use of the invention;
b) As a rule, the advance payment and royalty amount for an exclusive
license is higher than that for a non-exclusive license. The price of an absolute
permit is more expensive compared to an indirect license because other
persons, including the patent owner, will not have the right to use the patented
invention;
c) The licensor monitors the fulfilment of absolute license conditions
unilaterally. If there are several indirect licensees, the licensor will have to
spend time monitoring each of them.
Disadvantages of licensing are:
a) when an exclusive license is granted, the patent owner cannot provide
the license to other (third) persons and cannot use the invention himself unless
the patent owner obtains an exclusive license from the licensee later. The
3
Intellectual Property Commercialization: Policy Options and Practical Instruments. United Nations, Geneva
(Switzerland), 2011. https://unece.org/fileadmin/DAM/ceci/publications/ip.pdf
THEORETICAL ASPECTS IN THE FORMATION OF
PEDAGOGICAL SCIENCES
International scientific-online conference
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disadvantage in this regard is that if the selected licensee cannot implement or
sell the invention effectively, the patent owner will not be able to carry out such
activities later, nor will he be able to license it to others in the future. Therefore,
in the process of negotiating an exclusive license, a list of specific actions
(measures) that the licensee must perform, as well as the (optimum) minimum
level of sales and royalties paid to the patent owner, the agreement on the
amount must be clearly defined;
b) when drawing up a license agreement, it is necessary to consider many
possible situations and factors that may affect the subject of the license to
reduce future problems, costs and litigation. When drawing up a license
agreement, it is essential to analyse all options as much as possible to foresee
and clearly define positive and negative changes during the agreement term. For
example, if sales are higher or lower than expected, what options do the licensee
and licensor have to respond to the situation? Or does the license automatically
terminate at the licensor's discretion if the licensee becomes insolvent?
c) monitoring the licensee's compliance with (absolute and non-absolute)
license conditions may be difficult, as the license requires constant attention,
and other new developments may push it to the sidelines. Although it is difficult
to follow or monitor the licensee's compliance with the license terms, the
licensor must monitor it. Otherwise, the licensor may find it challenging to
convince the court (if necessary) that the licensee still needs to meet the
production standard agreed upon in the license.
d) as a result, the patent holder may negotiate with one or more parties. A
patent owner negotiates a license agreement with several parties, each
assuming responsibility for using the patent owner's invention.
e) Usually, the advance payment and royalties for the non-exclusive license
are lower than for the exclusive license since others may also have the right to
use the patented invention. For this reason, the upfront fee for an exclusive
license is usually lower than for a transfer of rights.
f) the licensee cannot file a lawsuit in court for violations within the scope
of an exclusive license, except for patent owners and exclusive licensees.
Therefore, if third parties commit a violation under an exclusive license, the
patent owner usually assumes the responsibility of applying to the court for the
corresponding violation
4
.
Therefore, in the commercialisation of intellectual property objects, the
licensing strategy is used when the following cases are observed:
4
Intellectual Property Commercialization: Policy Options and Practical Instruments. United Nations, Geneva
(Switzerland), 2011. https://unece.org/fileadmin/DAM/ceci/publications/ip.pdf
THEORETICAL ASPECTS IN THE FORMATION OF
PEDAGOGICAL SCIENCES
International scientific-online conference
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Firstly, the inability to independently develop new markets under the
influence of various (economic, legal and other) factors.
secondly, in the form of double income, that is, on the one hand, profit from
own business and, on the other hand, from license fees, and in some cases,
commissioning and servicing of necessary equipment;
thirdly, obtaining the right to use the licensee's accounting information
fully;
Fourthly, there is a reduction of competition between the parties to the license
agreement, especially within the framework of the exclusive license agreement.
References:
1. Ned T. Himmelrich. A Sole License and an Exclusive License Are Not the Same
//
URL:
https://www.gfrlaw.com/what-we-do/insights/sole-license-and-
exclusive-license-are-not-same
2. Intellectual Property Commercialization: Policy Options and Practical
Instruments.
United
Nations,
Geneva
(Switzerland),
2011.
https://unece.org/fileadmin/DAM/ceci/publications/ip.pdf
