Understanding Confidentiality and Licensing for Your Business
Kelsey Lewis, External Communications Manager at IPO

Every business, big or small, will own or use some form of intellectual property (IP) but in many cases don’t realise that it’s one of the most valuable assets you can own.

The four main types of IP rights are:

  • Patents – which protects the processes that make things work
  • Designs – which protects the look of a product
  • Trade marks – which can protect your ‘brand’ in the market place
  • Copyright – which protects written or recorded material

Like physical property, IP can be bought, sold and licensed. These rights can allow the owner to try and stop others from replicating, using, importing or selling their creation.

Licensing

IP can be “licensed-out” or “licensed-in”. You can “license-out” to another company in return for a fee. You can “license-in” if you want to use another company’s IP to develop your own business and products. The person granting the licence is usually called the licensor, and the person receiving the licence is usually called the licensee. There may be more than one licensor or more than one licensee in a licence agreement.

There are many benefits of licensing which include:

  • Sharing costs and risks
  • Broadening your reach
  • Accessing expertise
  • Collaboration

There are however, instances when granting or taking a licence isn’t appropriate. You can find a list of these instances on our website. For any further information and tips on brand licensing, check out or recent podcast with licensing company ‘Born Licensing’.

The IPO has a database of patents that are endorsed ‘licence of right’. This means that the patent holder has agreed to licence their patent to anyone who asks. In contrast, if you have a patent, you can ask the IPO to endorse your patent with a licence of right in the register of patents. This means that you must grant a licence to anyone who wants one.

The main advantages of having your patent endorsed with a licence of right is that it lets other people know you are happy to licence your intellectual property. For more information on licences of right, visit our licensing webpages.

Franchising

If your business is thriving and you’re wanting to expand, one option is to license IP to franchisees. In addition to the actual product or service, the various forms of IP such as trade marks, promotional materials, business and marketing systems, shop fit-outs and confidential information can all be licensed to the franchisee to use.

Franchising is a way of sharing IP with others to distribute goods or services – the franchisor owns the IP rights and the franchisee pays a fee or regular royalties to use them.

A major benefit of the franchise system is the ability to trade under a well-known trade mark. Usually, the franchisor grants a trade mark licence to the franchisee in return for a percentage of the gross turnover.

One example of a successful franchise is Costa® coffee. They give the franchisee permission to use their brand and a business template to use. This sets out how the premises must look, the service levels and training required. The franchisee then gives Costa® a percentage of their earnings.

Watch our IP Basics video on licensing and franchising to learn more.

Non-disclosure agreements

At some point in your journey, you may need help from a third party to create or distribute your products. That’s where a non-disclosure agreement (NDA) will come in.

An NDA is a legal contract which sets out how you share information or ideas in confidence. A good NDA restricts the use of the ideas and information to a specific permitted purpose such as evaluation or the discussion of a collaboration. Either way, make sure you specify the purpose in your NDA as precisely as you can.

NDAs are especially important when applying for patent protection. Many countries including the UK have firm rules on when an invention is considered to be in the public domain.

If you reveal your invention to anybody before applying for a patent, it is considered a public disclosure and may prevent you from getting a valid patent. For example, producing your invention in a public exhibition to how it works, would jeopardise any future patent protection.

An IP attorney or solicitor can advise on confidentiality and draw up an appropriate NDA for you to use. You should consider what your NDA covers. It could protect information which is recorded and marked ‘confidential’, and it could also protect information you share in meetings or presentations.

For further help with NDAs, the IPO has developed a free online tool called the IP Health Check. This will help you identify the necessary practical and legal steps to keep your ideas and information confidential.

IP for Business

The IPO promotes innovation and growth by offering a vibrant programme of activities and informed advice and support for businesses. So, whether you’re new to IP, brushing up on your skills, or wondering how to differentiate trade marks from copyright, this is the best place to start.

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