It has tremendous potential to monetize the value of IP and generate revenues for the licensor. Licensing IP results in expanding sales and an enhanced cash flow, thereby realizing its worth as an asset. Prior to parting with the IP or know-how, it is advisable to shroud even preliminary discussions in confidentiality/non-disclosure agreement with post-termination negative covenants.

From the perspective of the IP owner, at least, all tenets prescribed by the general law of contract and specific legislations governing IP ought to be complied with. Some provisions are bound to vary depending upon the particular IP being licensed e.g. in case of trade marks, provisions safeguarding goodwill by exercising quality control would feature in any arrangement. Similarly, if the subject matter of the license agreement is copyright, patents or designs, specific clauses/provisions would require to be incorporated. Generally, a license must define the intellectual property being licensed, goods or services covered by the agreement, exclusivity, territory (geographical scope), consideration (lump sum fee and/or royalties), term, permitted and prohibited uses, general warranties and indemnities, confidentiality obligations, assignment and sublicense terms, liquidated damages (if any), responsibility of initiating infringement action/s etc.