What You Should Know about Intellectual Property Licences and Transfers

Generally, by default, intellectual property is owned by the individuals who created it and, where applicable, registered or patented it in their jurisdiction. However, there are several circumstances under which intellectual property may need to be, or is, licensed or transferred to another. This process is often more complex than simply acknowledging the transaction between the two parties and is dependent on the type of intellectual property that needs to be transferred. Transfers of intellectual property may be registered with the Canadian Intellectual Property Office. The procedure for registration varies with the type of intellectual property that is transferred. Registration of transfers provides public notice of the entities with rights to the intellectual property and may also be advisable to ensure the transfer is upheld against a subsequent transfer.

The Parties to a Licence or Transfer

Licensor vs Licensee

The Licensor is the party who has the intellectual property rights being licensed under the licence. The Licensee is the party receiving the rights granted by the licence from the Licensor.

Assignor vs Assignee

The Assignor is the party who has the intellectual property rights being assigned or transferred. The Assignee is the party receiving the rights via the assignment or transfer. Sometimes transferor and transferee may be used in place of assignor and assignee.

Types of Licences and Transfers

Intellectual property can be transferred in several ways, which differ in the exclusivity of the transfer (i.e., whether the asset is passed directly from one entity to another or is shared among multiple owners) and the permanence of the transaction. Generally, transfers of intellectual property fall within four main categories:

• Exclusive licence - a temporary granting of rights in the intellectual property asset to another entity for the purposes of production and commercial distribution or use of the intellectual property asset. This type of licence is given exclusively (as the name suggests) to one entity, usually for a royalty or lump sum fee given to the original creator. The term of the licence can vary but has a defined end date. The holder of an exclusive licence to the intellectual property asset is the only individual/entity entitled to make, use or sell it, as applicable – meaning the original creator does not share this entitlement during the term of the licence.
  
• Non-exclusive licence - similarly temporary in nature and is contractually based on an exchange between the owner and the licensee. It differs from exclusive licensing in that the intellectual property can be temporarily transferred to multiple entities rather than just one. For instance, multiple franchisees within a franchise may each hold non-exclusive licenses to the use of the franchise’s trademarks. Non-exclusive licensing is usually conditional on the licensee's acceptance of the terms set out by the licensor and these terms can be different for each of the licensees.
• Assignment - a permanent transfer of the asset to another owner through a contract that cannot be revoked without the consent of the assignee. The original owner retains no control or interest in the intellectual property and can no longer derive any benefit from it unless he or she acquires a licence from the new owner. Intellectual property can be assigned immediately upon creation (i.e., where employees' works immediately become property of the employer), or later through an agreement between the two parties.
• Inheritance - occurs when the original owner passes away and follows the general inheritance process of the jurisdiction unless specific provisions have been made in the will. Due to the nature of the transfer, it is permanent. The recipient of the intellectual property inheritance may choose to transfer or license it to another owner using one of the three methods described above.

Intellectual property transfers such as assignments ought to be registered with the Canadian Intellectual Property Office (CIPO) or foreign intellectual property offices as appropriate to ensure the assignor doesn't subsequently assign the right to someone else who then registers it. In Canada, if a patent is transferred but the transfer is not registered, that transfer is void against a subsequent transferee of the patent. This is also true of an assignment of copyright.

In the case of patents and trademarks, registration of transfers may be requested by the transferor without the need to furnish evidence of the transfer (in the form of an assignment agreement, for example). If a transferee requests registration of the transfer, they are required to provide proof of the transfer. To register an assignment or licence of copyright, evidence of the same is required irrespective of whether the assignee/licensee or assignor/licensor makes the request. A nominal fee of $100.00 ($65.00 for copyright) must also accompany any request for the registration of a transfer of intellectual property.

Transferring Different Types of Intellectual Property

Not all intangible assets can be transferred in the same manner; there are specific provisions that govern transfers based on the type of intellectual property in question.

Patents and industrial designs can be assigned, licensed or inherited in whole or in part. Patents that are co-owned cannot be divided into more parts without the consent of other co-owners – transfers may be made to a single other entity without such consent.

Registered trademarks may be, but ought not to be, transferred separately from the goodwill accumulated by the business. While their transfer does not have to be recorded by CIPO and will be recognized in courts if it was made in good faith between the assignor and assignee, an official recordal can ease further transfers and protect from third party litigation. Registered trademark rights can be assigned in whole or in part. Transfers of unregistered trademarks, on the other hand, cannot be recorded with CIPO as they are governed entirely through common law. Such a transfer will also have to transfer the trademark in full to be valid and ought to concurrently transfer the goodwill associated with the business.

Copyright may be transferred from the original owner to the new owner through licensing, assignment, or inheritance. Contractual transactions, however, will not apply to the moral rights; only the economic rights to the copyrighted work are eligible to be transferred. The only instance in which moral rights can be transferred from the original owner to the new owner is through inheritance. Otherwise, an author can only waive their moral rights. Copyright encompasses multiple rights, including the rights of reproduction, performance and publication of the work, and an assignment or licence of copyright can affect all or only some of these rights. Further, according to the Canadian Copyright Act, an assignment or licence of copyright must be in writing to be valid.

Further Considerations

Transfers and licences of intellectual property should not be taken lightly. Before committing to a written licence or assignment, make sure to evaluate all the pros and cons of the transfer and determine whether what you are receiving in exchange for your intangible asset is commensurate with its value. Evaluate all contracts with which you are presented, including employment and freelancing agreements, thoroughly to be aware of any transfers or licences to which your work will be subject. Where possible, get a legal review of the contracts governing the transfer to obtain a better understanding of them.

If you need help with a transfer or licence, contact us for a complimentary and confidential initial telephone appointment with a member of our team.