License

A license (American English) or licence (British English)[1] is an official permission or permit to do, use, or own something (as well as the document of that permission or permit).[1]

"Licence" redirects here. For the historian, see Tom Licence.
Property law
Part of the common law series
Types
Acquisition
Estates in land
Conveyancing
Future use control
Nonpossessory interest
Related topics
Other common law areas
Higher category: Law and Common law

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.[2] 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.[3]

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.

Real Property Licenses

A license provides one party with the authority to act on another's land, when such action would typically amount to trespass absent that license. A key distinction between licenses and leases is that a license grants the licensee a revocable non-assignable privilege to act upon the land of the licensor, without granting any possessory interest in the land.[4] Once a license is agreed upon, the licensee may occupy the land only so far as is necessary to complete the act. Another key distinction between a license and a lease is that leases are generally required to be in writing, where the statute of frauds requires it, while licenses can be made orally.

Creation

A license is generally created by an express or implied agreement. The licensor must agree to the license which can be shown in writing or the licensors acquiescence in its exercise. Furthermore, unlike many other contractual agreements, a license does not require consideration, a license can be created with or without it. Moreover, whether an agreement is held to be a “license” and not a lease will depend on three essential characteristics of a license: (1) a clause allowing the licensor to revoke “at will"; (2) the retention by the licensor of absolute control over the premises; and (3) the licensor’s supplying to the licensee all of the essential services required for the licensee’s permitted use of the premises. [5]

Termination

Under a pure licensing agreement, the licensor, under its terms and by common-law, can cancel the agreement at will and without cause, unless it is coupled with an interest or made irrevocable by contract. A license that has been coupled with an interest is not revocable by the licensor without exposure to liability and potential damages. In the event a license is coupled with an interest, the licensor must provide reasonable time for the licensee to remove that interest from the property prior to termination. Additionally, because a license does not confer any possessory interest in the licensee, in the event of a sale of the property, the license is terminated and cannot be enforced against the new owners of that property. Moreover, the death of either the licensee or licensor will terminate the agreement.

Remedies

If a license is revocable at will by the licensor, courts will be unable to grant specific performance in favor of the licensee.[6] A licensee would be unsuccessful in bringing forcible entry claims or a detainer proceeding because the licensee was never granted any possory interest. The Licensee would also not be able to recover damages for money spent unless they are able to show detrimental reliance on the license. In certain cases, however, licenses can be made irrevocable, and specific performance may be granted. Where a license is made with a set term period and valid consideration is transferred, revocation of the license prior to the terms expiration may raise breach of contract claims that could provide damages against the licensor. Furthermore, once the licensor terminates or revokes the license, notice is statutorily required prior to the commencement of any special proceeding to recover possession of the property (e.g., in NY that requirement is 10 days).

Mass licensing of software

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) 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.

Under a typical end-user license agreement, the user may install the software on a limited number of computers.

The enforceability of end-user license agreements is sometimes questioned.

As of 2020, there are various ways to license software with different kinds of licensing models, which allow software vendors to profit from their product offerings in flexible ways. [7]

Patent licensing

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.[8] 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.[9]

Advantages of a licensing agreement:

  • A primary advantage of a licensing agreement, the firm does not have to bear the development and risks associated with opening a foreign market. It is very attractive for firms lacking the capital to develop operations overseas. Licensing can be attractive when a firm is unwilling to commit substantial financial resources to an unfamiliar or politically volatile foreign market.[9] Licensing is primarily used with a firm wants to participate in a foreign market but is prohibited because of barriers to investment.

Disadvantages of a licensing agreement

  • First, it does not give a firm the tight control over manufacturing, marketing, and strategy that is required for realizing experience curve and location economies.[9]
  • Second, competing in a global market may require a firm to coordinate strategic moves across countries by using profits earned in one country to support competitive attacks in another. Licensing limits a firm's ability to do this.[9]
  • Lastly, a third problem with licensing is the relationship of the economic theory of FDI. This is associated with licensing technological know-how foreign companies. Technological know-how constitutes the basis of many multinational firms' competitive advantages. Most firms wish to control how their know-how is used, because they can lose control easily. Many firms make the mistake of thinking they could maintain control over their know-how within the licensing agreement.[9]

Trademark and brand licensing

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.

Artwork and character licensing

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 Gato) 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.

Academia
National examples of the licentiate are listed at licentiate (degree)

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.[10][11] 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.

Vehicle licensing
See also: Driver's license

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.

Criminal law
Main articles: Parole § United Kingdom, Temporary licence, and Release on licence

In the United Kingdom prisoners serving a determinate sentence (a fixed time in prison) will be released prior to the completion of their full sentence "on licence".[12] The licence is the prisoner's agreement to maintain certain conditions, such as periodic reporting in to a probation officer and only living at an approved address, in exchange for their early release. If they break the conditions of the licence, they can be "recalled" (returned to prison).[13][14]

Offenders serving determinate sentences are released automatically at a set point in their sentence, whereas prisoners serving indeterminate sentences (e.g. life imprisonment) can only be released by the parole board.[15]

Economic theory

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.[16] 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.[17] 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.[18][19] Antelo and Sampayo (2017) have studied the optimal number of licenses in a signalling model.[20]

Criticism

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.

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See also

Intellectual property-related:

Other:

References
  1. "licence Meaning in the Cambridge English Dictionary". dictionary.cambridge.org. Retrieved 15 April 2018.
  2. Intellectual Property Licensing: Forms and Analysis, by Richard Raysman, Edward A. Pisacreta and Kenneth A. Adler. Law Journal Press, 1999-2008. ISBN 978-1-58852-086-9
  3. Licensing Intellectual Property: Law & Management, by Raman Mittal. Satyam Law International, New Delhi, India, 2011. ISBN 978-81-902883-4-7.
  4. "Using a License Agreement Instead of a Lease - ALBPC". Adam Leitman Bailey PC - New York Real Estate Attorneys. Retrieved 2020-07-16.
  5. "Commercial Property: Landlords May Entirely Eliminate Leasing". Adam Leitman Bailey PC - New York Real Estate Attorneys. Retrieved 2020-07-16.
  6. "Using a License Agreement Instead of a Lease - ALBPC". Adam Leitman Bailey PC - New York Real Estate Attorneys. Retrieved 2020-07-16.
  7. Software Licensing Models - Ultimate Guide (2020) 10duke.com
  8. "U.S.C. Title 35 - PATENTS". www.gpo.gov. Retrieved 15 April 2018.
  9. Hill, Charles W.L. (2015). International Business: Competing in the Global Marketplace (10th ed.). New York: McGraw Hill. pp. 455–456. ISBN 978-0-07-811277-5.
  10. Oxford Living Dictionaries Accessed September 16, 2012
  11. "Definition of LICENTIATE". www.merriam-webster.com. Retrieved 15 April 2018.
  12. "Release on licence". National Prisoners' Families Helpline.
  13. "Licence conditions, licences and licence and supervision notices" (PDF). National Offender Management Service. 23 March 2015. Archived (PDF) from the original on 2 March 2018.
  14. Gianquitto, Lisa; Rule, Philip (1 February 2012). "Licences and Licence conditions". InsideTime. Archived from the original on 7 July 2019.
  15. "An outline of the parole process". gov.uk.
  16. Template:Cite مع journal
  17. Bhattacharya, Sudipto; Glazer, Jacob; Sappington, David E. M (1992). "Licensing and the sharing of knowledge in research joint ventures". Journal of Economic Theory. 56 (1): 43–69. doi:10.1016/0022-0531(92)90068-S. ISSN 0022-0531.
  18. Schmitz, Patrick W. (2002). "On Monopolistic Licensing Strategies under Asymmetric Information". Journal of Economic Theory. 106 (1): 177–189. doi:10.1006/jeth.2001.2863. ISSN 0022-0531.
  19. Schmitz, Patrick W. (2007). "Exclusive versus non-exclusive licensing strategies and moral hazard". Economics Letters. 97 (3): 208–214. doi:10.1016/j.econlet.2007.03.021. ISSN 0165-1765.
  20. Antelo, Manel; Sampayo, Antonio (2017). "On the Number of Licenses with Signalling". The Manchester School. 85 (6): 635–660. doi:10.1111/manc.12157. ISSN 1467-9957.
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