Right to sublicense: Overview, definition, and example
What is the right to sublicense?
The right to sublicense refers to the ability of a party, typically the licensee in a licensing agreement, to grant permission to a third party (a sublicensee) to use the licensed intellectual property (IP) under the terms of the original license agreement. Essentially, it allows the licensee to extend the rights they have received from the original licensor to other parties. The right to sublicense is typically specified in the original licensing agreement, and whether or not this right exists depends on the terms negotiated between the licensor and licensee.
For example, if a software company licenses its software to another company, and that company has the right to sublicense, it can grant permission to its customers or other partners to use the software under the same terms.
Why is the right to sublicense important?
The right to sublicense is important because it allows the licensee to extend their use of the licensed material or technology to third parties, thereby potentially increasing revenue or business opportunities. It also provides flexibility in business arrangements where the licensee may want to allow others to use the intellectual property without having to involve the original licensor.
For licensors, granting the right to sublicense can help expand the reach of their intellectual property, while still maintaining control over how it is used. However, it is often subject to specific terms and conditions to protect the licensor’s interests and ensure that sublicensing does not undermine the value or control of the original license.
Understanding the right to sublicense through an example
Let’s say a pharmaceutical company licenses a patented drug formula to a manufacturer. The license agreement includes a clause granting the manufacturer the right to sublicense the formula to other regional distributors. The manufacturer, in turn, sublicenses the formula to a distributor in another country, allowing them to produce and sell the drug under the same terms. This allows the pharmaceutical company to expand its market reach while the original licensee gains the ability to sublicense the rights to others for further distribution.
In another example, a software company licenses its proprietary code to a game development studio. The game studio has the right to sublicense the software to other developers, enabling the studio to expand its use and create new versions of the game or offer software as a service to others.
An example of a right to sublicense clause
Here’s how a clause like this might appear in a licensing agreement:
“The Licensee shall have the right to sublicense the rights granted under this Agreement to third parties, provided that such sublicenses are in accordance with the terms of this Agreement and are approved in writing by the Licensor. The Licensee shall remain responsible for the performance of any sublicensee under this Agreement.”
Conclusion
The right to sublicense is an important aspect of licensing agreements, as it allows licensees to extend the use of intellectual property to third parties, increasing their business potential and expanding market reach. For licensors, it offers a way to grow their intellectual property’s impact without relinquishing control over how it is used. However, granting this right often comes with conditions to ensure that the licensor’s interests are protected. By including a clear and well-defined right to sublicense clause, both parties can enjoy the benefits of broader use and distribution while maintaining proper oversight and control.
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.