Limited right of sublicense: Overview, definition, and example
What is a limited right of sublicense?
A limited right of sublicense refers to the permission granted by the original holder of a license (the licensor) to allow another party (the licensee) to grant sublicenses to others under specific, restricted conditions. Unlike an unrestricted sublicense, which allows broad authority to pass on the license to third parties, a limited right of sublicense imposes specific limits on how, when, and to whom the license can be sublicensed. These limitations are typically outlined in the licensing agreement to ensure that the licensor retains control over how their intellectual property or assets are used.
For example, a software developer may grant a company the limited right to sublicense their software to clients, but only for specific geographic regions or for particular types of use.
Why is a limited right of sublicense important?
A limited right of sublicense is important because it allows the original licensor to maintain control over the distribution and use of their intellectual property while still enabling their licensees to leverage the asset. This can be beneficial in situations where the licensor does not want to directly engage with a wide range of third parties but is open to allowing certain licensees to sublicense in a controlled manner.
For licensees, a limited right of sublicense offers the potential to generate revenue or expand their reach by granting sublicenses, but with restrictions that protect the interests of the original licensor. This ensures that sublicensing is not done in a way that would harm the licensor’s brand, intellectual property, or business objectives.
Understanding limited right of sublicense through an example
Imagine a music producer who holds the exclusive rights to a song. The producer may grant a record label the limited right to sublicense the song to regional distributors but only within certain countries. This means the record label can sublicense the song to third parties, such as local radio stations or streaming services, but only in the specified countries. The record label is restricted from sublicensing the song outside of these territories, protecting the producer’s interests and ensuring that the song is not overexposed in regions where the producer may want to maintain exclusivity.
In another example, a software company may grant a reseller the limited right to sublicense its software to end users but with the condition that sublicenses are only granted to businesses within a particular industry, such as healthcare. This ensures that the software is used within a niche market and limits the risk of misuse in unrelated industries.
An example of a limited right of sublicense clause
Here’s how a clause about a limited right of sublicense might appear in a contract:
“The Licensee is granted a limited right to sublicense the Licensed Product to third parties, provided that such sublicenses are only granted within the United States and for the purpose of distribution to commercial customers in the retail sector. Any sublicensing outside these parameters is prohibited without the prior written consent of the Licensor.”
Conclusion
A limited right of sublicense allows the original licensor to grant a licensee the ability to sublicense intellectual property under specific, controlled conditions. This arrangement provides flexibility for the licensee to expand the reach of the licensed asset while ensuring that the licensor retains control over its use. Whether in software, music, patents, or other intellectual property areas, a limited right of sublicense can help manage how a licensed asset is distributed and utilized, protecting both the interests of the original owner and the licensee.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.