For hundreds of years institutionalised manners of protecting intangible assets have made risk capitalists more willing to invest in entrepreneurs. Through the invention of such institutions as patents, trademarks and copyrights to artistic creations in many states around the world have made sure that it is commercially beneficial to further develop our knowledge and productivity.

In today's international business world we rely upon branding, patents and other means of protection of our intellectual property rights more than ever before.

The value of licensing trademarks

When The Simpsons went on the air, the show only had 12 licensees. In 2003, there were more than 1,110 Simpsons items licensed worldwide. The products include such things as sleepwear, PC screen savers, electric calendars, golf balls, pacifiers and trading cards. Some of the items can be worn, some displayed, some used and some consumed. By the one hundredth episode of the television show, over $3 billion worth of Simpsons merchandise had been sold worldwide.

Risks and Rewards

In negotiating a deal, the competing interests of both the intellectual property owner and the licensee have to be taken into account. The owner naturally wants to earn as much as possible and will usually receive a fixed amount of money or a certain percentage of the sales of the licensed property.

At the same time, the licensee wants to earn a fair profit for taking the risk in opening a new market or channel for the licensed assets. In order to do this, it needs a certain amount of freedom to exploit the possibilities. A key consideration is the degree of risk the licensee incurs. After all, there is always the possibility that the market for the services or products is not lucrative enough. Ideally, a licensing agreement is a balanced compromise between these competing objectives.

Most agreements between the parties regulate that the use of a certain invention or trademark is licensed for a specific amount of time for a specific territory. The license usually allows the licensee to deliver services or manufacture products, advertise, distribute and sell these on an exclusive or non-exclusive basis.

When a licensing agreement expires, the rights to the property are usually returned to the intellectual property owner, including all of the materials used to produce the licensed results. In some agreements, however, the licensee could have the right to acquire the actual ownership to the intellectual property when the agreement expires.

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