The word ‘licence’ comes from the Latin word ‘lice'ntia’, which means ‘permission’. Holding a licence therefore means that you have permission for something.
A licence could for example mean that you have permission to utilise someone else’s intangible assets of some kind. For example, this could be a patent, a trademark, a trade secret or something that is protected through copyright.
The owner of an intangible asset can opt to licence it out. The owner will then become a ‘licensor’. The party that purchases the right to use a patent, for example, is known as the ‘licensee’. The licensee will then pay a fee to the licensor, which can be in the form of royalties, a fixed amount or a oneoff amount. A distinction is made between non-exclusive licences and exclusive licences. An non-exclusive licence means that many parties can use the same licence, while an exclusive licence means that an individual licensee has exclusive rights.
A party that utilises someone else’s intangible rights without a licence can commit an infringement.
Anyone who purchases software for their computer, e.g. the Office package, is in reality purchasing a licence which gives them the right to use a copy of the software. Beer and soft drinks are often manufactured under licence; for example, the Swedish brewery Spendrup produces beverages for the international brand Heineken under licence.
Test your business
In the test, we will help you identify your intangible assets: