Sub-Licensing: Concept, Meaning and Benefits

As the name suggests “Sub-Licensing” is the process by which a license is issued by the Licensee, to a third-party, granting them to use all or some of the rights conferred upon the Licensee, by the Licensor (lets call this the “original license”). The right of sub-licensing is available to the Licensee, to further license the rights he/she already has in lieu of the original license, to another.

However, what we need to understand and pay careful attention to, is that there is no legislation in India, that provides for sub-licensing of intellectual property licenses. The obvious corollary to this proposition is that, therefore, there is no legislation that prohibits it either.

It is pertinent to understand, that sub-licensing is permitted in India, insofar as it may be provided for in a Licensing Agreement, expressly or impliedly. However, in the absence of a clause to this effect, there is no legislation or statute that permits sub-licensing of IP licenses in India. Practically, if a Licensee wishes to sub-license the original license which he is getting rights to, he must ensure that a clause to this effect is incorporated in the Licensing Agreement entered into, between himself and the Licensor. Accordingly, if there is a clause in the Licensing Agreement that states that the Licensee has no right to sub- license, then this condition will also bind the Licensee.

One might wonder, “what about the sub-license granted in pursuance of the Licensing Agreement, when the term of the Licensing Agreement ends/it is terminated?”.

As the terms of any license agreement are binding upon the parties that have entered into the agreement, if the clause specifying the termination period of the license suffices such termination and expiration, the same will automatically have an impact on any sub- license granted by the licensee in absence of any particular provision mentioned in the agreement. If the sub-licensed party still continues to use the licensed intellectual property right such an act will lead to infringement implications.

Often, the Licensee may be the agent of the licensor and thus the sub-licensee may be a sub-agent. In such cases, the licensor is directly responsible to the sub-licensee on the representations of the licensee and the termination of the license between licensor and licensee may not automatically lead to the termination of the sub-license.

A typical sub-license Clause in a Licensing Agreement, looks something like this:

“Right to Sublicense Licensee shall be free to grant sub-licenses to any Subsidiary or Affiliate of Licensee for so long as such Person remains a Subsidiary or an Affiliate of Licensee. Any such sub-license shall be subordinate to and conform to the terms and conditions of this License, and shall not include the right for such sub-licensee to grant sub-licenses to persons who are not also Subsidiaries or Affiliates of Licensee. Licensee shall also be free to grant sublicenses to persons who are not Subsidiaries or Affiliates of Licensee to the extent necessary to exercise its “have made” rights as provided in Section 2.1.

Any such sub-license shall be subordinate to and conform to the terms and conditions of this License; shall not include the right for such sublicensee to grant sublicenses to other persons; and shall not include the right for such sublicensee to make, sell or distribute products made using the Licensed IP for such sublicensee’s own account or the account of any person other than Licensee or a Subsidiary or Affiliate of Licensee.

In addition, Licensee shall require that any such sub-licensee implement and maintain practices and policies sufficient to preserve the confidentiality of all Licensed IP provided to such sub licensee by Licensee, and Licensee shall be solely responsible, as between Licensee and Licensor, for any breach of confidentiality with respect to the Licensed IP by any such sublicense. Except as expressly set forth in this provision, Licensee shall not, without the prior written approval of Licensor, which approval shall not be unreasonably withheld, delayed, or conditioned, sublicense or transfer in any way any Licensed IP.”

Benefits of Sub-Licensing

There are multiple benefits of sub-licensing. It is beneficial for the Licensor, Licensee, the Sub-Licensee, as well as society at large.

Benefits for Licensor:

  • The Licensor’s can enter a varied variety of markets and geographical locations, with the help of sub-licensing; to which he may otherwise not have had access;
  • The Licensor retains ownership and absolute control of his product/service while also marketing it across borders;
  • The Licensor builds goodwill and reputation across boundaries without having to invest anything on it;
  • Creating a strong base of valuable Licensees ensures improved reputation and services, capturing a large market share;
  • By licensing, and further sub-licensing to a well-established brand, the Licensor can leverage their experience, infrastructure and involvement, thereby being able to move the product into the market with greater ease and speed and giving a competitive advantage.

Benefits for Licensee:

  • Sub-Licenses are a source of income for the Licensee;
  • They provide the Licensee with a large amount of autonomy and control over operations
  • The Licensee can expand the scope of the license and also gain monetary benefit from it;
  • The Licensee not only uses the IP for himself, but also sub-licenses it to others as an additional source of income.

Benefits for Sub-Licensee:

  • Sub-Licenses allow the sub-licensee to use the brand, logo and goodwill of the Licensor with low investment;
  • The Sub-Licensee does not have to bear the cost of research and development for a fully function product which comes with an instruction manual on how to use/produce it; and
  • It also saves the Sub-Licensee from investing in research and development for new technology to enter into the market, as it has access to the technology through licensing.

Sub-Licensing

As the name suggests “Sub-Licensing” is the process by which a license is issued by the Licensee, to a third-party, granting them to use all or some of the rights conferred upon the Licensee, by the Licensor (lets call this the “original license”). The right of sub-licensing is available to the Licensee, to further license the rights he/she already has in lieu of the original license, to another.

However, what we need to understand and pay careful attention to, is that there is no legislation in India, that provides for sub-licensing of intellectual property licenses. The obvious corollary to this proposition is that, therefore, there is no legislation that prohibits it either.

It is pertinent to understand, that sub-licensing is permitted in India, insofar as it may be provided for in a Licensing Agreement, expressly or impliedly. However, in the absence of a clause to this effect, there is no legislation or statute that permits sub-licensing of IP licenses in India. Practically, if a Licensee wishes to sub-license the original license which he is getting rights to, he must ensure that a clause to this effect is incorporated in the Licensing Agreement entered into, between himself and the Licensor. Accordingly, if there is a clause in the Licensing Agreement that states that the Licensee has no right to sub- license, then this condition will also bind the Licensee.

One might wonder, “what about the sub-license granted in pursuance of the Licensing Agreement, when the term of the Licensing Agreement ends/it is terminated?”.

As the terms of any license agreement are binding upon the parties that have entered into the agreement, if the clause specifying the termination period of the license suffices such termination and expiration, the same will automatically have an impact on any sub- license granted by the licensee in absence of any particular provision mentioned in the agreement. If the sub-licensed party still continues to use the licensed intellectual property right such an act will lead to infringement implications.

Often, the Licensee may be the agent of the licensor and thus the sub-licensee may be a sub-agent. In such cases, the licensor is directly responsible to the sub-licensee on the representations of the licensee and the termination of the license between licensor and licensee may not automatically lead to the termination of the sub-license.

A typical sub-license Clause in a Licensing Agreement, looks something like this:

“Right to Sublicense Licensee shall be free to grant sub-licenses to any Subsidiary or Affiliate of Licensee for so long as such Person remains a Subsidiary or an Affiliate of Licensee. Any such sub-license shall be subordinate to and conform to the terms and conditions of this License, and shall not include the right for such sub-licensee to grant sub-licenses to persons who are not also Subsidiaries or Affiliates of Licensee. Licensee shall also be free to grant sublicenses to persons who are not Subsidiaries or Affiliates of Licensee to the extent necessary to exercise its “have made” rights as provided in Section 2.1.

Any such sub-license shall be subordinate to and conform to the terms and conditions of this License; shall not include the right for such sublicensee to grant sublicenses to other persons; and shall not include the right for such sublicensee to make, sell or distribute products made using the Licensed IP for such sublicensee’s own account or the account of any person other than Licensee or a Subsidiary or Affiliate of Licensee.

In addition, Licensee shall require that any such sub-licensee implement and maintain practices and policies sufficient to preserve the confidentiality of all Licensed IP provided to such sub licensee by Licensee, and Licensee shall be solely responsible, as between Licensee and Licensor, for any breach of confidentiality with respect to the Licensed IP by any such sublicense. Except as expressly set forth in this provision, Licensee shall not, without the prior written approval of Licensor, which approval shall not be unreasonably withheld, delayed, or conditioned, sublicense or transfer in any way any Licensed IP.”

Benefits of Sub-Licensing

There are multiple benefits of sub-licensing. It is beneficial for the Licensor, Licensee, the Sub-Licensee, as well as society at large.

Benefits for Licensor:

  • The Licensor’s can enter a varied variety of markets and geographical locations, with the help of sub-licensing; to which he may otherwise not have had access;
  • The Licensor retains ownership and absolute control of his product/service while also marketing it across borders;
  • The Licensor builds goodwill and reputation across boundaries without having to invest anything on it;
  • Creating a strong base of valuable Licensees ensures improved reputation and services, capturing a large market share;
  • By licensing, and further sub-licensing to a well-established brand, the Licensor can leverage their experience, infrastructure and involvement, thereby being able to move the product into the market with greater ease and speed and giving a competitive advantage.

Benefits for Licensee:

  • Sub-Licenses are a source of income for the Licensee;
  • They provide the Licensee with a large amount of autonomy and control over operations
  • The Licensee can expand the scope of the license and also gain monetary benefit from it;
  • The Licensee not only uses the IP for himself, but also sub-licenses it to others as an additional source of income.

Benefits for Sub-Licensee:

  • Sub-Licenses allow the sub-licensee to use the brand, logo and goodwill of the Licensor with low investment;
  • The Sub-Licensee does not have to bear the cost of research and development for a fully function product which comes with an instruction manual on how to use/produce it; and
  • It also saves the Sub-Licensee from investing in research and development for new technology to enter into the market, as it has access to the technology through licensing.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at adv.aishwaryasandeep@gmail.com

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge

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