Technology Licensing
Technology licensing allows innovations to be monetized without transferring ownership. In Chile, this agreement establishes clear terms —territory, duration, royalties— to exploit intangible assets with legal certainty. This article explains its structure, key differences —assignment, NDA— and practical examples.
Generate income without transferring ownership
Technology licensing allows a company to authorize third parties to use its technology, know-how, or intangible assets in exchange for payments —royalties or fees— without losing ownership of the right.
It is a key strategy for scaling businesses, entering new markets, or monetizing innovation. This model is part of technology transfer and combines commercial and legal aspects, ensuring profitable exploitation of intellectual property.
What is technology licensing?
A technology licensing agreement is an agreement where the owner —licensor— allows another party —licensee— to use protected technology.
The license is conditional access: The licensee obtains rights of use —manufacturing, marketing, adapting the product— for a specific period and under agreed terms.
According to WIPO’s technology licensing agreements, licensing usually defines the use, territory, duration, and consideration. In practice, technology licensing specifies in detail how the technology is exploited: Geographic territories, fields of use, and timeframes.
Key elements of a technology licensing agreement
An effective technology license agreement should include:
- License Object: Detailed description of the authorized technology, invention, or know-how.
- Territory Of Use: Countries or markets where the license applies.
- Duration: Term of validity —for example, 3 to 5 years, renewable.
- Exclusivity: Determining whether the license is exclusive or non-exclusive.
- Right To Sublicense: Whether the licensee may sublicense to affiliates or others.
- Payments And Royalties: Initial fees and/or percentage over net sales. For example, it is common to agree on 1% to 5% of net sales as royalty.
- Technical Obligations: Technical assistance, delivery of manuals, or technology updates.
- Warranties: Product quality, regulatory compliance, indemnities for infringement.
- Confidentiality: Protection of related confidential information —trade secrets, know-how.
- Applicable Law: Usually Chilean law and a dispute resolution mechanism.
For example, INAPI explains that licenses usually define the territory, duration, and exploitation conditions. In practice, these terms are set out in detailed clauses, sometimes complemented with payment tables based on volume or sales milestones.
License vs. Assignment vs. Other Agreements
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Technology License vs. Assignment: A license grants a temporary right of use; an assignment permanently transfers ownership. By analogy, a license is like renting a property: You pay to use it and then return it. Assignment is like selling the house: Ownership changes permanently. Thus, under a license, the licensor may continue exploiting the technology in other markets or grant additional licenses; under an assignment, that control ends.
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License vs. NDA: An NDA —non-disclosure agreement— protects information during negotiations, but does not authorize any use. The NDA prevents unauthorized leaks; the license opens the door to commercial use under agreed conditions. It is advisable to sign an NDA beforehand to protect secrets —plans, formulas, know-how— while negotiating the license.
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License vs. Franchise/Collaboration: A franchise includes a brand and complete business model; a joint venture creates a new entity. A license focuses only on the technology, without combining capital or brand —although it may include process know-how. It is the ideal instrument when the goal is to transfer use without merging business operations.
| Concept | License | Assignment |
| Ownership | Remains With The Licensor | Transfers To The Assignee |
| Rights | Use Conditioned By Contract | Full Use Without Limitations |
| Duration | Limited In Time —e.g., 5 Years | Permanent —Like A Sale |
| Territory | Limited By Agreement —e.g., Chile, Continent | Not Applicable —Full Right |
| Payments | Periodic Fees Or Royalties —e.g., % Of Sales | One-Time Payment Or Specific Agreement |
| Future Rights | Licensor May Continue Exploiting Other Uses | Assignor Loses All Control |
Technology Licensing Flow Example
Practical Examples Of Technology Licensing
- A software startup licenses its platform to a bank for 5 years, charging 2% of the sales of the services generated. The agreement defines exclusivity in Chile and quarterly payments.
- A pharmaceutical company licenses drug technology worldwide. It pays an initial fee and a 3% royalty on annual sales, with quarterly sales reports.
- A university grants non-exclusive licenses for a manufacturing process to several companies in Latin America, receiving tiered royalties based on volume —for example, 2% up to 10,000 units and 3% above 10,000.
- A mining company licenses an innovative sensor to international affiliates. It allows local sublicenses while guaranteeing minimum annual payments to protect against underexploitation.
Risks And Mitigations
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Licensee Breach: Mitigated with sales audits, periodic reports, and contractual penalties if royalties are not paid.
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Conflicts Between Licensees: In non-exclusive licenses, each licensee may compete in the same market. This can be avoided by limiting territories or segments.
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Technological Obsolescence: If technology changes quickly, the value of the agreement may decrease. Update or technical support clauses can help.
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Unauthorized Sublicensing: If the licensee sublicenses without permission, the agreement is breached. Sublicensing should be allowed only with written approval.
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Incorrect Valuation: Setting royalties too high may discourage licensees; setting them too low may undervalue the technology. Negotiation should be based on market studies and WIPO examples.
Relationship With Technology Transfer And Asset Protection
Technology licensing is fundamental in any technology transfer strategy. It allows proprietary research to be exploited without being assigned.
It complements IP registrations —patents, trademarks— and confidentiality agreements. A well-structured license maximizes revenue and facilitates collaborations, since a licensed product may continue to be protected by patent or trade secret.
Start Click® provides comprehensive advice: From contract structuring to negotiation of terms and legal protection of the assets involved.
Our lawyers experienced in technology licensing can help design license agreements that maximize your benefits and protect your rights.
Frequently Asked Questions About
Technology Licensing
What is a technology licensing agreement?
It is an agreement in which the owner of a technology authorizes another party to use it —for example, to manufacture or market a product— under established conditions: Territory, term, and payments.
How is payment for a license calculated?
A royalty is usually agreed, meaning a percentage of the licensee’s net sales. For example, research or medical technologies often use between 1% and 5%. Initial fees or guaranteed minimum payments may also be included.
What is the difference with technology assignment?
A license allows temporary use under contract; an assignment transfers ownership permanently —like selling the technology. With a license, the inventor retains future rights; with an assignment, they lose them. In a license, the licensor may continue exploiting the technology, unlike in an assignment.
Can licensed technology be sublicensed?
Yes, if the agreement allows it. Many licenses authorize the licensee to sublicense —for example, to affiliates or subcontractors— within the agreed scope. This must be expressly agreed to avoid confusion.
Is an NDA useful before negotiating the license?
Yes. A confidentiality agreement protects sensitive information —plans, formulas, know-how— shared during negotiations. It does not transfer any right of use, but helps ensure the technology remains secret until the license is signed.
What happens if the technology is not patented?
In Chile, licensing works best when the technology is protected —for example, by patent. If it is not registered, protection relies on confidentiality and contractual documentation. For this reason, it is advisable to patent or register the technology before licensing it, strengthening the security of the agreement.
Boost Your Innovation With Secure Licenses
Legal advice on technology licensing agreements, sublicenses, and protection of intangible assets.
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