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Licensing intellectual property can create valuable growth opportunities, but it also comes with legal risks that businesses can’t afford to ignore. When entering into a licensing agreement, both parties must clearly define rights, responsibilities, and expectations to avoid future disputes.
Unclear Scope Of The License
One of the most common issues in IP licensing is failing to clearly define what the license covers. Is the license exclusive or non-exclusive? Is it limited by territory, field of use, or duration? If any of these details are vague or omitted, the licensee may end up using the IP in ways the licensor did not anticipate — or worse, in ways that cause financial or reputational harm. Clarity in the language used to define rights is key to preventing misunderstandings down the line. This is a prime example as to why working with an attorney to get licensing is so important.
Ownership Disputes
If a business licenses intellectual property without having verified ownership, it may later face legal claims from third parties. This happens when licensors attempt to license rights they don’t fully control or when multiple parties have competing claims to the IP. Before entering any agreement, it’s important to confirm that the IP is valid, enforceable, and unencumbered by prior agreements or legal restrictions. As a licensing lawyer can explain, an attorney can help review ownership status and uncover any red flags.
Lack Of Performance Obligations
In some cases, licensors may expect the licensee to commercialize the IP or meet certain milestones — but if those expectations aren’t included in the agreement, there’s little legal recourse if the licensee falls short. For example, if a tech company licenses a patent to another firm expecting sales growth, the contract should include clear performance benchmarks, reporting duties, or minimum royalty requirements. Without these terms, the IP may sit unused, wasting its potential value. It may also cost you money in the long run.
Poorly Defined Payment Terms
Ambiguous royalty structures, vague payment schedules, or unclear definitions of net sales can create serious disagreements. Licensing deals need clear, measurable financial terms. If the agreement doesn’t specify how royalties are calculated or audited, it may lead to underpayment or disputes that can only be resolved through legal action. These financial terms should be reviewed from both a legal and business perspective to avoid future problems.
Termination And Renewal Issues
Another common issue involves the lack of clearly defined terms for ending or renewing the agreement. What happens if one party wants to walk away early? Can the license be transferred or sublicensed? Is there a path to renew the license, and under what conditions? These are not questions to leave open-ended. A solid contract spells out how the relationship can evolve — or end — without causing conflict. The more specific you can be throughout this whole process, the better.
Lack Of Ip Protection Measures
Licensing agreements should include provisions for protecting the underlying IP. This can include clauses requiring the licensee to maintain confidentiality, avoid reverse engineering, or report infringements by third parties. If these terms are missing, it becomes harder for the licensor to control how the IP is used and protected. That can lead to dilution of rights or even loss of exclusivity in certain markets.
Licensing intellectual property can bring in new revenue, open new markets, and build valuable partnerships — but only if the legal groundwork is strong. Attorneys like those at COFFYLAW can attest to how often businesses run into trouble when contracts are rushed or key terms are left vague. Whether you’re the licensor or licensee, it’s important to work with a business litigation lawyer who understands the risks and can help draft or review agreements with the right level of detail.
If you’re considering a licensing deal or need a licensing attorney to evaluate existing agreements, it’s worth getting proper legal advice before signing on. A licensing agreement should support your goals — not create new problems.
