How Do I License My Intellectual Property to Someone Else?

The steps to licensing intellectual property in Canada

Licensing lets an intellectual property (IP) owner grant someone else permission to use a patent, trademark, or copyrighted work, without giving up ownership. Because patents, trademarks, and copyright are all federal subject matter in Canada, the rules below apply identically whether the licensor or licensee is in Ontario, Alberta, or any other province.

1. Identify which IP right you’re licensing. Copyright, trademarks, and patents are governed by separate federal statutes with different rules, so the first step is knowing which one applies to what you’re licensing out.
2. Decide exclusive or non-exclusive. For copyright, the Copyright Act defines an “exclusive licence” as one that excludes everyone, including the owner, from doing the licensed act, whether the licence was granted by the owner directly or by an exclusive licensee claiming under the owner, under section 2.7. A non-exclusive licence leaves the owner free to keep using the work and to license others.
3. Put the licence in writing and get it signed. For copyright specifically, section 13(4) of the Copyright Act states that a copyright owner may grant any interest in the right by licence, but no licence is valid unless it is in writing and signed by the owner or the owner’s authorized agent. Verbal copyright licences carry no legal weight.
4. For trademarks, build in quality control. Section 50(1) of the Trademarks Act says that if the licensee uses the mark with the owner’s authority and the owner has direct or indirect control over the character or quality of the goods or services, the licensee’s use is deemed to be the owner’s own use. Without that control, the licence risks not counting as use by the owner at all.
5. Use public notice to your advantage. If public notice is given that use of a trademark is licensed and identifies the owner, section 50(2) creates a rebuttable presumption that the use is licensed and under the owner’s control, which shifts the burden onto anyone challenging the licence.
6. For patents, remember what you’re actually licensing. Section 42 of the Patent Act grants the patentee the exclusive right to make, construct, and use the invention, and to sell it to others to be used. A patent licence is a grant of some or all of that exclusive right for a defined scope or term.
7. Consider recording the licence with CIPO. The Canadian Intellectual Property Office allows owners to register a “grant of interest,” which covers licences, and CIPO charges a distinct fee to record a licence interest, separate from the fee for recording an assignment. If the registration request is missing required information, the Copyright Regulations give the applicant 60 days to fix the defect before the request is rejected.
8. Check the licence doesn’t cross into anticompetitive territory. Under section 32 of the Competition Act, the Federal Court can declare a patent, trademark, or copyright licence void in whole or in part, or restrain its terms, if it is used to unduly restrain trade or lessen competition.

A worked example

A software developer based in Alberta owns the copyright in a mobile app and wants to let a Toronto-based distributor sell it in Ontario without giving up ownership. Because this is a copyright licence, the developer drafts a written, non-exclusive licence agreement and signs it, satisfying the writing requirement in section 13(4) of the Copyright Act. The agreement is non-exclusive rather than exclusive, so the developer can still sell the app directly and license it to other distributors at the same time. Because this is federal law, the same written-and-signed requirement would apply if both parties were in Ontario, or if one were in Alberta and the other in Quebec.

Common mistakes

• Relying on a verbal or email-only copyright licence. Section 13(4) requires a written, signed licence; an informal exchange of messages agreeing to terms does not meet that bar and may leave the “licensee” with no enforceable rights at all.
• Licensing a trademark without any quality control mechanism. Without direct or indirect control over the character or quality of the licensed goods or services, the licensee’s use may not count as the owner’s use under section 50(1), which can undermine the mark’s enforceability.
• Treating an assignment and a licence as the same thing. An assignment transfers ownership; a licence grants permission to use while the owner keeps the underlying right. Recording fees at CIPO are also charged separately for each, so confusing the two can mean paying for, or filing, the wrong thing.
• Assuming recording a licence with CIPO is automatic. If a registration request is missing required information, the applicant only has 60 days under the Copyright Regulations to cure the defect before the request is rejected outright.
• Writing licence terms that go too far. Terms that unduly restrain trade or lessen competition can be declared void, in whole or in part, by the Federal Court under section 32 of the Competition Act, regardless of what the licence agreement says.