What Is IP Leasing and How Does It Actually Work?

Imagine having your own intellectual property (IP), a creation of your mind that you have spent a lot of time perfecting and can sell for a good price. However, instead of selling your creation, you lease it to other companies allowing them to use it under your rules while you collect a steady income. IP leasing is one of the latest trends in the corporate world that can make you a lot of money if done right.

Read this if you are: a star upstart with a great brand name or patent, a large company that wants to diversify its sources of income and you have no idea how to do that other than develop new products or a business owner that is curious about how companies such as Disney or Nike make money without producing anything themselves.

So, What Exactly Is IP Leasing?

IP leasing is when you allow another company to use your intellectual property, such as a trademark, patent, copyright, or trade secret, for a certain amount of time in exchange for a royalty or licensing fee. The intellectual property is not sold, only leased or licensed for a specific period of time and under specific conditions.
Think of IP leasing as renting your idea or creation. You do not sell your creation, but you allow someone else to use it for a certain amount of time and in exchange for a fee, similar to how you might rent an apartment.

How It Actually Works

1. Ownership retention: The property rights of the asset stay with the assignor (licensor).
2. Licensing agreement: A formal contract is drawn up that determines the rights given to the recipient (licensee). It should state what can and cannot be used, where and for how long the usage is allowed.
3. Payment conditions: The payment method should be specified in the contract as a fixed sum, a percentage of sales (royalty) or a combination of both.
4. The use of intellectual property: The licensee may apply the asset for example, by putting a trademark on a product, implementing a patent in the production process, or operating a business under a franchising system.
5. Monitoring: The licensor should watch over the use of their asset to ensure that the terms of the contract are followed and the company’s reputation is not at risk.

Why Companies Do This

• Extra income with little effort: You don't have to create or promote anything.
• Global reach with no global staff: You can let other companies handle the business in regions you're not in.
• Shared risk and reward: Someone else takes over the creation and local risk, but you still get a cut.
• Brand building: Think of all the different ways Disney's characters appear, from lunchboxes to clothing to theme parks around the world, yet Disney doesn't produce all of that itself.