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A license (or licence) is an official permission or permit to do, use, or own something (as well as the document of that permission or permit). A license is granted by a party (licensor) to another party (licensee) as an element of an agreement between those parties. In the case of a license issued by a government, the license is obtained by applying for it. In the case of a private party, it is by a specific agreement, usually in writing (such as a
lease A lease is a contractual arrangement calling for the user (referred to as the ''lessee'') to pay the owner (referred to as the Lessor (leasing), ''lessor'') for the use of an asset. Property, buildings and vehicles are common assets that are l ...
or other contract). The simplest definition is "A license is a promise not to sue," because a license usually either permits the licensed party to engage in an activity which is illegal, and subject to prosecution, without the license (e.g.
fishing Fishing is the activity of trying to catch fish. Fish are often caught as wildlife from the natural environment, but may also be caught from fish stocking, stocked bodies of water such as fish pond, ponds, canals, park wetlands and reservoirs. ...
, driving an automobile, or operating a broadcast radio or television station), or it permits the licensed party to do something that would violate the rights of the licensing party (e.g. make copies of a copyrighted work), which, without the license, the licensed party could be sued, civilly, criminally, or both. In particular, a license may be issued by authorities, to allow an activity that would otherwise be forbidden. It may require paying a fee or proving a capability (or both). The requirement may also serve to keep the authorities informed on a type of activity, and to give them the opportunity to set conditions and limitations. A licensor may grant a license under
intellectual property Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, ...
laws to authorize a use (such as copying software or using a
patent A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an sufficiency of disclosure, enabling disclo ...
ed invention) to a licensee, sparing the licensee from a claim of infringement brought by the licensor. A license under intellectual property commonly has several components beyond the grant itself, including a term, territory, renewal provisions, and other limitations deemed vital to the licensor. Term: many licenses are valid for a particular length of time. This protects the licensor should the value of the license increase, or market conditions change. It also preserves enforceability by ensuring that no license extends beyond the term of the agreement. Territory: a license may stipulate what territory the rights pertain to. For example, a license with a territory limited to "North America" (Mexico/United States/Canada) would not permit a licensee any protection from actions for use in Japan. Again, a shorthand definition of license is "a promise by the licensor not to sue the licensee". That means without a license any use or exploitation of intellectual property by a third party would amount to copying or infringement. Such copying would be improper and could, by using the legal system, be stopped if the intellectual property owner wanted to do so. Intellectual property licensing plays a major role in business, academia and broadcasting. Business practices such as
franchising Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses some or all of its know-how, procedures, intellectual property, use of its busine ...
,
technology transfer Technology transfer (TT), also called transfer of technology (TOT), is the process of transferring (disseminating) technology from the person or organization that owns or holds it to another person or organization, in an attempt to transform invent ...
, publication and character merchandising entirely depend on the licensing of intellectual property. Land licensing (proprietary licensing) and IP licensing.


Real property licenses

A license provides one party with the authority to act on another's land, when such action would typically amount to trespass absent that license. A key distinction between licenses and leases is that a license grants the licensee a revocable non-assignable privilege to act upon the land of the licensor, without granting any possessory interest in the land. Once a license is agreed upon, the licensee may occupy the land only so far as is necessary to complete the act. Another key distinction between a license and a lease is that leases are generally required to be in writing, where the statute of frauds requires it, while licenses can be made orally.


Creation

A license is generally created by an express or implied agreement. The licensor must agree to the license which can be shown in writing or the licensors acquiescence in its exercise. Furthermore, unlike many other contractual agreements, a license does not require consideration, a license can be created with or without it. Moreover, whether an agreement is held to be a “license” and not a lease will depend on three essential characteristics of a license: (1) a clause allowing the licensor to revoke “at will"; (2) the retention by the licensor of absolute control over the premises; and (3) the licensor's supplying to the licensee all of the essential services required for the licensee's permitted use of the premises.


Termination

Under a pure licensing agreement, the licensor, under its terms and by common-law, can cancel the agreement at will and without cause, unless it is coupled with an interest or made irrevocable by contract. A license that has been coupled with an interest is not revocable by the licensor without exposure to liability and potential damages. In the event a license is coupled with an interest, the licensor must provide reasonable time for the licensee to remove that interest from the property prior to termination. Additionally, because a license does not confer any possessory interest in the licensee, in the event of a sale of the property, the license is terminated and cannot be enforced against the new owners of that property. Moreover, the death of either the licensee or licensor will terminate the agreement.


Remedies

If a license is revocable at will by the licensor, courts will be unable to grant specific performance in favor of the licensee. A licensee would be unsuccessful in bringing forcible entry claims or a detainer proceeding because the licensee was never granted any possory interest. The Licensee would also not be able to recover damages for money spent unless they are able to show detrimental reliance on the license. In certain cases, however, licenses can be made irrevocable, and specific performance may be granted. Where a license is made with a set term period and valid consideration is transferred, revocation of the license prior to the terms expiration may raise breach of contract claims that could provide damages against the licensor. Furthermore, once the licensor terminates or revokes the license, notice is statutorily required prior to the commencement of any special proceeding to recover possession of the property (e.g., in NY that requirement is 10 days).


Mass licensing of software

Mass distributed software is used by individuals on personal computers under license from the developer of that software. Such license is typically included in a more extensive
end-user license agreement An end-user license agreement or EULA () is a legal contract between a software supplier and a customer or End user, end-user, generally made available to the customer via a retailer acting as an intermediary. A EULA specifies in detail the rights ...
(EULA) entered into upon the installation of that software on a computer. Typically, a license is associated with a unique code, that when approved grants the end user access to the software in question. Under a typical end-user license agreement, the user may install the software on a limited number of computers. The enforceability of end-user license agreements is sometimes questioned. As of 2020, there are various ways to license software with different kinds of licensing models, which allow software vendors to profit from their product offerings in flexible ways.


Patent licensing

Like other intellectual property, patent owners may grant permission to others to engage in conduct that would otherwise be within the scope of a patent. For example, a patent owner may authorize a licensee to make, use, sell, offer for sale, or import a patented product. Such agreements are typically referred to as a patent license agreement or a covenant not to sue. These agreements can last for a specific period of time (such as 5 years) or for the entire life of the patent (''i.e.,'' until the patent expires). Patent license agreements may also be exclusive (''i.e.,'' the licensee is the only person or entity that is allowed to sell, make, use, offer to sell, or import the patented invention) or non-exclusive (''i.e.,'' the licensee is simply one of several entities who has rights under the patent). Finally, any rights given under the agreement may be limited to a particular "field of use" (''e.g.,'' a licensee may be able to practice an invention in the field of consumer electronics, but not in the field of industrial electronics). Often, patent owners will require a licensee to pay money in exchange for granting a patent license. Such payments are referred to as royalty payments and come primarily in two forms: lump sum or running royalty. A lump sum royalty involves an upfront, one-time payment, while a running royalty typically involves periodic payments (''e.g.,'' quarterly or annual) based on the number of patented products sold or imported.


Trademark and brand licensing

A licensor may grant permission to a licensee to distribute products under a
trademark A trademark (also written trade mark or trade-mark) is a type of intellectual property consisting of a recognizable sign (semiotics), sign, design, or expression (language), expression that identifies Good (economics and accounting), product ...
. With such a license, the licensee may use the trademark without fear of a claim of trademark infringement by the licensor. The assignment of a license often depends on specific contractual terms. The most common terms are, that a license is only applicable for a particular geographic region, just for a certain period of time or merely for a stage in the
value chain A value chain is a progression of activities that a firm operating in a specific industry performs in order to deliver a valuable product (business), product (i.e., Goods, good and/or Service (economics), service) to the end customer. The concept ...
. Moreover, there are different types of fees within the trademark and brand licensing. The first form demands a fee independent of
sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in ...
and profits, the second type of license fee is dependent on the productivity of the licensee. For example,
McDonald's McDonald's Corporation is an American Multinational corporation, multinational fast food chain store, chain, founded in 1940 as a restaurant operated by Richard and Maurice McDonald, in San Bernardino, California, United States. They rechri ...
licenses their trademark such as the " Golden Arches" or the "
Big Mac The Big Mac is a hamburger sold by the international fast food restaurant chain McDonald's. It was introduced in the Greater Pittsburgh Region, Greater Pittsburgh area in 1967 and across the United States in 1968. It is one of the company's fl ...
," but the licenses gives McDonald's a right to impose strict quality standards to their franchisees as they can take back the right to the trademark if they do not meet McDonald's standards. When a licensor grants permission to a licensee to not only distribute, but manufacture a patented product, it is known as
licensed production Licensed production is the production under licence, license of technology developed elsewhere. The licensee provides the licensor of a specific product with legal production rights, technical information, process technology, and any other proprieta ...
.


Artwork and character licensing

A licensor may grant a permission to a licensee to copy and distribute
copyright A copyright is a type of intellectual property that gives its owner the exclusive right to copy, distribute, adapt, display, and perform a creative work, usually for a limited time. The creative work may be in a literary, artistic, education ...
ed works such as "art" (e.g., Thomas Kinkade's painting ''Dawn in Los Gato'') and characters (e.g.,
Mickey Mouse Mickey Mouse is an animated cartoon Character (arts), character co-created in 1928 by Walt Disney and Ub Iwerks. The longtime mascot of The Walt Disney Company, Mickey is an Anthropomorphism, anthropomorphic mouse who typically wears red sho ...
). With such license, a licensee need not fear a claim of copyright infringement brought by the copyright owner.
Artistic license Artistic license (alongside more contextually-specific derivative terms such as poetic license, historical license, dramatic license, and narrative license) refers to deviation from fact or form for artistic purposes. It can include the alterat ...
is, however, not related to the aforementioned license. It is a
euphemism A euphemism () is an innocuous word or expression used in place of one that is deemed Profanity, offensive or suggests something unpleasant. Some euphemisms are intended to amuse, while others use bland, inoffensive terms for concepts that the us ...
that denotes freedom of expression, the ability to make the subject appear more engaging or attractive, by fictionalizing part of the subject.


Academia

:''National examples of the licentiate are listed at
licentiate (degree) A licentiate (abbreviated Lic.) is an academic degree present in many countries, representing different educational levels. It may be similar to a master's degree when issued by pontifical university, pontifical universities and other universiti ...
'' A licentiate is an
academic degree An academic degree is a qualification awarded to students upon successful completion of a course of study in higher education, usually at a college A college (Latin: ''collegium'') is an educational institution or a University sy ...
that traditionally conferred the license to teach at a university or to practice a particular profession. The term survived despite the fact that nowadays a
doctorate A doctorate (from Latin Latin (, or , ) is a classical language belonging to the Italic languages, Italic branch of the Indo-European languages. Latin was originally a dialect spoken in the lower Tiber area (then known as Latium) around pr ...
is typically needed in order to teach at a university. The term is also used for a person who holds a licentiate. In English, the degree has never been called a license. In France, the ''licence'' is the first degree awarded in Universities. In
Sweden Sweden, formally the Kingdom of Sweden,The United Nations Group of Experts on Geographical Names states that the country's formal name is the Kingdom of SwedenUNGEGN World Geographical Names, Sweden./ref> is a Nordic countries, Nordic c ...
, Finland, and in some other European university systems, a 'licentiate' is a postgraduate degree between the master's degree and the doctorate. The licentiate is a popular choice in those countries where a full
doctoral degree A doctorate (from Latin ''docere'', "to teach"), doctor's degree (from Latin ''doctor'', "teacher"), or doctoral degree is an academic degree awarded by universities and some other educational institutions, derived from the ancient formalism ''li ...
would take five or more years to achieve.


Vehicle licensing

A license to driving certain vehicles has been applied to many countries around the world. Being allowed to drive a certain vehicle requires a specific driving license, the type of license depending on the type of vehicle.


Criminal law

In the United Kingdom prisoners serving a determinate sentence (a fixed time in prison) will be released prior to the completion of their full sentence "on licence". The licence is the prisoner's agreement to maintain certain conditions, such as periodic reporting in to a probation officer and only living at an approved address, in exchange for their early release. If they break the conditions of the licence, they can be "recalled" (returned to prison). Offenders serving determinate sentences are released automatically at a set point in their sentence, whereas prisoners serving indeterminate sentences (e.g.
life imprisonment Life imprisonment is any sentence (law), sentence of imprisonment for a crime under which convicted people are to remain in prison for the rest of their natural lives or indefinitely until pardoned, paroled, or otherwise commuted to a fixed te ...
) can only be released by the parole board.


Economic theory

Patent licensing has been studied in formal economic models in the field of
industrial organization In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and market (economics), markets. Industrial organization adds real-world complic ...
. In particular, Katz and Shapiro (1986) have explored the optimal licensing strategy of a research lab selling to firms who are competitors on the product market. It turns out that (compared to the welfare-maximizing solution) the licensor's incentives to develop innovations may be excessive, while the licensor's incentives to disseminate the innovation are typically too low. Subsequently, the seminal work of Katz and Shapiro (1986) has been extended in several directions. For example, Bhattacharya, Glazer, and Sappington (1992) have taken into account that the firms acquiring licenses must make further investments in order to develop marketable products. Schmitz (2002, 2007) has shown that asymmetric information due to
adverse selection In economics Economics () is the social science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the beha ...
or moral hazard may lead the research lab to sell more licenses than it would do under complete information. Antelo and Sampayo (2017) have studied the optimal number of licenses in a
signalling In signal processing, a signal is a function that conveys information about a phenomenon. Any quantity that can vary over space or time can be used as a signal to share messages between observers. The ''IEEE Transactions on Signal Processing'' ...
model.


Criticism

The provision of licenses and the agencies that mandate them are often criticised by American libertarians like
Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on Consumption (economics), consumption analysis, Money supply, ...
for creating an anticompetitive environment for occupations, which creates a
barrier to entry In theories of Competition (economics), competition in economics, a barrier to entry, or an economic barrier to entry, is a fixed cost that must be incurred by a new entrant, regardless of production or sales activities, into a Market (economics) ...
for more qualified and skilled individuals who may not have the resources to obtain the necessary licences. According to Friedman, licenses and permits have become so burdensome due to legislation that favors the current establishment of wealthy occupants that they decrease the supply of such occupations, which raises prices for the average consumer. Libertarians and the anti-authoritarian left ( anarcho-communists) view competing guilds and other voluntary communes as being more beneficial for disseminating the skills and education required to perform a specified career.


See also


References


External links

{{Authority control Business law Strategic alliances Revenue models