Dear Doc:
It seems to me that every time I try to find out about intellectual property licensing, I end up more confused than ever. Are you able to help?
Signed,
Bothered and Bewildered
Dear B&B:
You are correct. Licensing is a complex area of business and of the law. Unfortunately, it is in the interest of intellectual property owners and their attorneys to keep it opaque, so it is unlikely that it will ever get much simpler. To provide at least a map to help you avoid the mines in the licensing minefield, the Doc will try to help.
When it comes to patents, inventors who apply for, and are granted a patent, have the right to exclude others from making, using, offering for sale, or selling the invention in the United States or importing the invention into the United States. 35 USC §271(a) (That’s why patents are called “exclusive rights”… duh!) Any or all of these exclusive rights may be the subject of a contract (called a license) that gives some other person or entity some or all of these rights for as long as the patent remains in force (typically 20 years from the date of the patent application, provided that certain fees are paid to the Patent Office). In return, the patent owner usually gets a license fee, or a royalty, although there are many other forms of compensation found in license agreements as well.
According to the United States Patent and Trademark Office, a trademark may not be licensed unless the owner retains the right to supervise the quality of the goods or services using the mark. Any attempt to license without quality control is called a “naked license” and is invalid, and may even destroy the rights in the mark itself! You’ve no-doubt seen licensed trademarks many times. For instance, the National Football League does not actually make hats, tee shirts, hoodies, sunglasses, shoes, or anything else, for that matter. The NFL licenses others to make these things with the NFL and team logos and names, and charges a huge sum (both upfront and as a percentage royalty) for the rights to sell these goods.
When it comes to copyrights, the world becomes even more confusing. This is because there are many rights that make up a copyright. The Copyright Act (17 U.S. Code § 106) enumerates those rights:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.”
Each of these rights may be separately assigned (sold) or licensed (granted by contract), and to make matters even more complicated, a copyrightable work may be created as a “work for hire”, and this makes the employer the author and owner for purposes of copyright, rather than the actual creator.
When it comes to musical works, traditional procedures in the music industry have resulted in a labyrinth of licensing arrangements. Depending on what you may want to do with a piece of music, you may actually need several licenses, each negotiated with and granted by a separate organization with different costs and rules. Here is just a sampling (pun intended) of these:
One final thought; perhaps, one of the most common intellectual property licenses is the one most people don’t think is a license at all – the nondisclosure agreement (NDA)! These agreements (also called a confidential disclosure agreement (CDA)) give a party the right to know and make limited business use of confidential information that may or may not be patented or protected by a copyright registration, but otherwise restricts what may be done with that information and who may have it.
So there you go…licenses are complicated and if you’re smart (and you’re reading this, so the Doc already knows that you are), you’ll give the attorneys are LW&H a shout the next time you need to deal with IP licensing of any kind.
Until next month,
The “Doc”
— Lawrence A. Husick, Esq.
*Originally posted on September 24, 2020