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How licensing can benefit tech companies

On Behalf of | Jul 1, 2024 | Business & Commercial Law

Businesses in the technology sector are often eager to innovate. They want to improve upon current hardware or develop cutting-edge software. The ideas and products generated by the employees at a tech company can form the foundation of the company’s long-term success.

Those who own and operate technology companies often do everything in their power to protect the intellectual property of the business. They may prosecute a patent or copyright the tune that plays in the background while software loads. Most businesses vigorously defend their intellectual property from infringement.

However, there are always businesses and individuals that don’t respect the intellectual property of others. Licensing agreements are one way for businesses to address potential infringement risks while simultaneously generating revenue from original concepts or creations.

How licensing works

Businesses and individuals who hold copyrights or patents can negotiate an agreement with an outside party to allow for the use of their intellectual property. A licensing agreement includes numerous crucial details including what intellectual property one company has permission to use and for how long or to what extent. The agreement likely also outlines the compensation provided to the copyright or patent holder.

Licensing agreements can be somewhat lucrative, especially if a concept or piece of software is necessary for another business’s operations. Licensing agreements can also be a proactive way to prevent other businesses from infringing on technological advances or in response to prior infringement. Many tech companies intentionally reach out to other organizations to negotiate licensing deals as a means of preventing infringement in the future.

Licensing agreements are complex contracts

Even someone who is comfortable negotiating standard business contracts may struggle to handle intellectual property matters. Too many businesses with valuable intellectual property resources make the mistake of using basic documents for each licensing agreement.

Given the overall value of intellectual property in the tech sector, working with an attorney to draft bespoke contracts for each licensing agreement is typically a good idea. The careful customization of business contracts can help tech-focused businesses protect their intellectual property. Licensing agreements can be very valuable for organizations with ideas that other companies want to use.