10 Key Intellectual Property (IP) Licensing Agreement Terms – What Terms Do You Need in Your Licensing Agreement?

AdobeStock_714509522-300x200An intellectual property licensing agreement allows a person to retain ownership of a patent, trademark, or copyright but gives another party permission to use some or all of their intellectual property rights for a specific amount of time for a fee or royalty. Intellectual property contracts usually specify termination dates and procedures, and any person trying to craft an intellectual property agreement will want to be working with an Texas intellectual property lawyer.

After you secure your intellectual property rights, it can be more convenient or valuable to let somebody else use the rights in exchange for a fee. Such logic is exactly why intellectual property agreements and contracts exist, but the documents can be complex and may require intensive negotiations.

Key Intellectual Property Licensing Terminology

Whatever license an IP owner grants, it will be critical that the owner enters into a written IP licensing agreement that is carefully drafted to satisfy the requirements of any laws relating to a particular IP right and protect the IP owner’s rights. IP licensing agreements may be very lengthy and complex, with terms varying depending on the IP right that is being licensed.

Most IP licensing agreements are going to include all 10 of these key terms:


A grant clause establishes the specific rights that are being bestowed. A grant can be exclusive, meaning that only a particular licensee can use the rights, or non-exclusive, meaning a licensor grants the same rights to multiple parties. Grants can also be restricted by geography, such that they apply only in the United States or worldwide. Grants can also restrict the type of field to rights for smartphones but not computers. A grant identifies the IP being licensed and the scope of the rights being granted.

Reservations & Restrictions

This will establish limitations on the purposes for which a licensee is permitted to use licensed IP rights. A reservation of rights is often found in an exclusive license and allows a licensor to continue practicing allocated IP rights under certain conditions.

Term & Termination

Term and termination state the length of a license, the grounds on which the parties may terminate a license, and the parties’ rights and obligations on termination or expiration of a license. It is often important to require a licensee to immediately cease using IP rights and remove all references to the IP from their materials in the event of termination or expiration of an agreement to protect an IP owner’s ownership of the IP rights. The nature and extent of a licensee’s obligations can vary depending on the nature of the IP involved, the industry in which the licensee operates, and the reason for the termination.


Acknowledgment of an IP owner’s exclusive rights and a licensee’s agreement not to challenge those rights. An acknowledgment often states that a licensee acknowledges that all copyrights, patent rights, trademarks, services marks, trade secrets, and other IP rights relating to IP are the sole and exclusive property of an IP owner and that the agreement does not give the licensee any right, title, or interest except the right to use the IP in accordance with the terms and conditions of the agreement.

Maintenance & Improvements

A licensee usually acknowledges that it will take whatever steps are necessary to protect an IP owner’s rights, and the IP owner owns any improvements the licensee makes to the IP rights. A patent license may define each party’s rights to improvements of patented technology, and improvements could be solely owned by a licensor, a licensee, or jointly owned by both.


IP royalties are payments a licensee makes to a licensor in exchange for the use of the licensor’s IP. Royalties are customarily a percentage of the net or gross revenue made by the IP, paid on a regular basis. The royalties section will establish the specific amount of royalties a licensee has to pay an IP owner, the terms of payments, the responsibility for any taxes, and an IP owner’s reporting and audit rights.


A critical aspect of any agreement involving technology and IP will be the use or non-use of any confidential information exchanged between the parties. Exchange of such information can be inevitable when building a relationship with another party, and confidentiality should be extended to include a party receiving information. Confidentiality provisions and confidentiality agreements establish and protect a company’s trade secrets and other information that are generally unavailable to the public. The terms are not necessarily limited to the purpose for the agreement. It is important to define what is or is not confidential information. Any confidential provision in an agreement should include conditions for excluding information from confidentiality.

Representations & Warranties

Representations and warranties often include an IP owner’s representations and warranties respecting the validity of the licensed IP right(s), confirmation that a license does not infringe any third party’s IP rights, and a licensee’s agreement to indemnify an IP owner for any loss caused by its acts or omissions and limits on a licensee’s liability to do so. Representations are statements of fact inducing parties to enter into contracts made before or at the time of making contracts, and they regard past facts or existing circumstances related to the contract which influence such a party to enter the contract. A warranty is an undertaking or stipulation that a certain fact in relation to the subject of the contract is or will be as it is stated or promised and refers to an agreement to protect a recipient against loss if the fact is or becomes untrue.

IP right-specific clauses

An IP clause grants ownership of a patent to the inventor of the patent. Particular clauses can be specific to the type of IP right(s) being licensed in a licensing agreement, possibly ensuring requirements of applicable laws are satisfied or ensuring an IP owner’s rights are adequately protected.

Other general legal terms

Standard contract clauses may include a governing law applying to a licensing agreement, the rights of an IP owner and a licensee to assign a license agreement, occurrences that will constitute a change of control of a party as well as the consequences of a change of control occurring, and the severability of the agreement clauses.

Call Us Today to Speak with a Texas Intellectual Property Lawyer

Are you looking for an experienced Texas IP lawyer to help you navigate the complexities of intellectual property law? Structure Law Group, LLP can help. Our Texas IP lawyers can give you the advice and guidance you need to create an agreement that best meets the needs of your business. With decades of industry experience, our team is dedicated to helping you understand and protect your intellectual property rights. Give us a call today at (512) 881-7500 or contact us online to schedule a consultation. We look forward to helping you.