What are disadvantages of IP Licensing?

What are disadvantages of IP Licensing?

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What are disadvantages of IP Licensing?

SOLUTION:

IP Licensing:

• An IP licensing agreement occurs between an IP rights owner (“licensor”) and someone who is authorized to use the rights (“licensee”) in exchange for monetary value in the form of a fee or a royalty.
• The two parties agree on the terms and conditions via negotiation, with the outcome dependent upon the bargaining power of each side.

Disadvantages:

• Though IP licensing is beneficial to both licensor & licensee, sometimes through licensing, the owner may lose his control on the technology & there may be great risk of piracy & exploitation by unauthorized parties.
• It may so happen that the licensee develops technology around the product, he has the license for & make the original licensor to lose his superiority.
• The revenue from the licensee depends on his performance. Hence the licensor loses the revenue to that extent. For the licensee, the technology may become redundant in short span of time & he may have to go in for a new one at a higher price.
• In case the technology is not tested, the licensee will be at great risk of losing the money if relevant risk aversion clauses are not stipulated in the agreement. Hence, in IPR licenses agreement, the terms & conditions need careful drafting.