Licensing vs. Assigning the Rights to Your Products - What is Best for You?

You have created the most wonderful widget of all times. You now want to share it with the world. You approach a company to manufacture and market it. They want to know what your intent is, to license the rights of your wonderful widget or to assign them. What do you tell the company you want to do? Do you have any idea which is best for you? Do you know the benefits of either contract? Many inventors believe an assignment and a license is the same thing. That is not so. Read on...

When you assign the rights to your creation, from a legal perspective, you give up all ownership rights to that creation. A license on the other hand is a temporary transfer of your rights to the created item, however, you retain ownership. Another way to look at it is to think of an assignment like selling your business and a license like renting it instead.

Today many manufacturers are creating legal documents to acquire rights from inventors and creators that blur the line between assignments and licenses. Sometimes this is a good thing and sometimes it is not. As the owner of the property to be licensed or assigned, you must be able to sort out what the agreement is attempting to do and whether what it is doing is right and advantageous for you.

Often the title of the agreement can be misleading. Some licenses and exclusive licenses carry the same effect as an assignment. To determine what's what, you must look for whether your rights are returned to you once the agreement terminates. This is what is known as reversion or reversionary rights. If reversion terminology is included in the agreement, next you need to determine if special provisions are attached to the property rights returning to you.

All inventors and product creators do not want the rights of their creation to revert back to them. If you do not fit in this category, here are some events under which you may wish to have your product rights return to you; when the agreement terminates, if the manufacturer discontinues selling the product for a fixed period of time, if the company does not begin marketing and selling your design within a certain period of time, or if the company materially breaks the agreement.

Revisionary rights are fairly common in most fixed term license agreements. In some states, an exclusive license creates a legal duty for the holder of the license to exploit it. Failure to do so could be deemed a material breach of the agreement and become grounds to get the rights back, unless you signed a license agreement that extended perpetual, for the life of the copyright rights to the manufacturer.

Even though assignment agreements generally transfer permanent ownership of your creation to the company, some companies are beginning to include reversionary rights in some of the provision of their agreements. Generally this is done when the company wishes to retain ownership rights which enable them to sue infringers, work with sublicense rights, to make variations or derivatives of your creation, and other such rights that only an owner can claim.

So what you tell the company regarding your intent and which legal agreement you wish to pursue is based upon whether you want your property rights back. There can be some income tax advantages depending on the type of agreement you select. Naturally, you should seek legal counsel before signing any agreement to make sure your rights are not being abused. Know ahead of time what rights you want then move forward and allow your wonderful widget to be enjoyed around the world.