A license can be granted by a party to another party as an element of an agreement between those parties. A shorthand definition of a license is "an authorization to use licensed material."
In particular, a license may be issued by authorities, to allow an activity that would otherwise be forbidden. It may require paying a fee or proving a capability. The requirement may also serve to keep the authorities informed on a type of activity, and to give them the opportunity to set conditions and limitations.
A licensor may grant a license under intellectual property laws to authorize a use (such as copying software or using a patented invention) to a licensee, sparing the licensee from a claim of infringement brought by the licensor. A license under intellectual property commonly has several components beyond the grant itself, including a term, territory, renewal provisions, and other limitations deemed vital to the licensor.
Term: many licenses are valid for a particular length of time. This protects the licensor should the value of the license increase, or market conditions change. It also preserves enforceability by ensuring that no license extends beyond the term of the agreement.
Territory: a license may stipulate what territory the rights pertain to. For example, a license with a territory limited to "North America" (Mexico/United States/Canada) would not permit a licensee any protection from actions for use in Japan.
A shorthand definition of license is "a promise by the licensor not to sue the licensee". That means without a license any use or exploitation of intellectual property by a third party would amount to copying or infringement. Such copying would be improper and could, by using the legal system, be stopped if the intellectual property owner wanted to do so.
Intellectual property licensing plays a major role in business, academia and broadcasting. Business practices such as franchising, technology transfer, publication and character merchandising entirely depend on the licensing of intellectual property. Land licensing (proprietary licensing) and IP licensing form sub-branches of law born out of the interplay of general laws of contract and specific principles and statutory laws relating to these respective assets.
Mass distributed software is used by individuals on personal computers under license from the developer of that software. Such license is typically included in a more extensive end-user license agreement (EULA)[clarification needed] entered into upon the installation of that software on a computer. Typically, a license is associated with a unique code, that when approved grants the end user access to the software in question.
The enforceability of end-user license agreements is sometimes questioned.
A licensor may grant permission to a licensee to conduct activities which would otherwise be within the, offer for sale, or import a patented product, or to perform a patented process. The term of a patent license may be a "fixed" (i.e., specified) term, such as 5 years, or may be for the life of the patent (i.e., until the patent expires). A patent is by its nature limited in territorial scope; it only covers activity within the borders of the country issuing the patent. Accordingly, a patent license does not require a territory provision.
The consideration provided by the licensee in return for the patent license grant is called a patent royalty payment. In a "paid-up" license, the "lump sum" royalty payment is a specified monetary amount, typically due shortly after the effective date of the patent (e.g., within 15 business days of the effective date), and no further payments are required. Otherwise, the royalty payment is a "running royalty," typically payable on an annual basis. The annual royalty may be a specified amount (e.g., one million dollars each year), or an amount proportional to the volume of licensed activity conducted by the licensee (e.g., one dollar per unit of licensed product sold by the licensee that year, or one percent of the net sales amount of the licensed products sold by the licensee that year).
A Licensing agreement is an arrangement whereby a licensor grants the right to intangible property to another entity for a specified period, and in return, the licensor receives a royalty fee from the licensee. Intangible property includes patents, inventions, formulas, processes, designs, copyrights, and trademarks.
Advantages of a Licensing Agreement:
Disadvantages of a Licensing Agreement
A licensor may grant permission to a licensee to distribute products under a trademark. With such a license, the licensee may use the trademark without fear of a claim of trademark infringement by the licensor. The assignment of a license often depends on specific contractual terms. The most common terms are, that a license is only applicable for a particular geographic region, just for a certain period of time or merely for a stage in the value chain. Moreover, there are different types of fees within the trademark and brand licensing. The first form demands a fee independent of sales and profits, the second type of license fee is dependent on the productivity of the licensee.
When a licensor grants permission to a licensee to not only distribute, but manufacture a patented product, it is known as licensed production.
A licensor may grant a permission to a licensee to copy and distribute copyrighted works such as "art" (e.g., Thomas Kinkade's painting "Dawn in Los Gatos") and characters (e.g., Mickey Mouse). With such license, a licensee need not fear a claim of copyright infringement brought by the copyright owner.
Artistic license is, however, not related to the aforementioned license. It is a euphemism that denotes freedom of expression, the ability to make the subject appear more engaging or attractive, by fictionalising part of the subject.
A licentiate is an academic degree that traditionally conferred the license to teach at a university or to practice a particular profession. The term survived despite the fact that nowadays a doctorate is typically needed in order to teach at a university. The term is also used for a person who holds a licentiate. In English, the degree has never been called a license. In France, the licence is the first degree awarded in Universities.
In Sweden, Finland, and in some other European university systems, a 'licentiate' is a postgraduate degree between the master's degree and the doctorate. The licentiate is a popular choice in those countries where a full doctoral degree would take five or more years to achieve.
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A license to driving certain vehicles has been applied to many countries around the world. Being allowed to drive a certain vehicle requires a specific driving license, the type of license depending on the type of vehicle.
In the United Kingdom prisoners may be released prior to the completion of their full sentence "on licence". Basically, the licence is the prisoner's agreement to maintain certain conditions, such as periodic reporting in to a probation officer and maintaining fixed address, in exchange for his freedom.Parole and release on licence are the same procedure by another name.
Patent licensing has been studied in formal economic models in the field of industrial organization. In particular, Katz and Shapiro (1986) have explored the optimal licensing strategy of a research lab selling to firms who are competitors on the product market. It turns out that (compared to the welfare-maximizing solution) the licensor's incentives to develop innovations may be excessive, while the licensor's incentives to disseminate the innovation are typically too low. Subsequently, the seminal work of Katz and Shapiro (1986) has been extended in several directions. For example, Bhattacharya, Glazer, and Sappington (1992) have taken into account that the firms acquiring licenses must make further investments in order to develop marketable products. Schmitz (2002, 2007) has shown that asymmetric information due to adverse selection or moral hazard may lead the research lab to sell more licenses than it would do under complete information. Antelo and Sampayo (2017) have studied the optimal number of licenses in a signalling model.
The provision of licenses and the agencies that mandate them are often criticised by libertarians, like Milton Friedman, for creating an anticompetitive environment for occupations, which creates a barrier to entry for more qualified and skilled individuals who may not have the resources to obtain the necessary licences. According to Friedman, licenses and permits have become so burdensome due to legislation that favors the current establishment of wealthy occupants that they decrease the supply of such occupations, which raises prices for the average consumer. Libertarians and the anti-authoritarian left (anarcho-communists) view competing guilds and other voluntary communes as being more beneficial for disseminating the skills and education required to perform a specified career.