Licensing agreement

How BC law treats it

A licensing agreement grants rights to use IP without transferring ownership, which distinguishes it from an assignment. It is a commercial contract, so in BC it is interpreted under ordinary contract principles. The Business Practices and Consumer Protection Act applies to consumer transactions, not business to business IP licences, and there is no statutory cooling off right for a commercial licence. The federal statutes add specific rules. Under the Trademarks Act, RSC 1985, c T-13, s. 50, use by a licensee counts as use by the owner only if the owner has direct or indirect control of the character or quality of the goods or services. An uncontrolled licence can undermine the mark's distinctiveness and its registration. Under the Copyright Act, RSC 1985, c C-42, s. 13(4), a grant of an interest in copyright by licence must be in writing and signed by the owner. An exclusive licensee holds rights that a non-exclusive licensee does not, as discussed in Euro-Excellence Inc v Kraft Canada Inc, 2007 SCC 37. Patent licences are made against the background of the Patent Act, RSC 1985, c P-4. Key terms include whether the licence is exclusive, sole or non-exclusive; field of use and territory; sublicensing rights; royalties and audit rights; quality control; ownership of improvements; warranties and indemnities; and termination. Restrictive terms, such as exclusive dealing or tied selling, can raise issues under the Competition Act, RSC 1985, c C-34, particularly where the licensor has market power.

What it means for your business

Licensing lets a BC business earn revenue from its brand, software or technology without selling it, and lets licensees use proven IP without building it. The agreement decides who controls quality, who owns improvements and what happens on termination. A loosely drafted licence can cost a trademark owner its registration, leave a licensee exposed to infringement claims, or lock both sides into terms they cannot exit. Investors and buyers review key licences closely in due diligence. Example: A Vancouver software startup grants a non-exclusive, Canada only licence of its scheduling platform to a clinic chain for an annual fee. The agreement keeps ownership of all improvements with the startup and prohibits sublicensing without consent.

Risks and common mistakes

Granting exclusivity without performance obligations, which can freeze the IP with an underperforming licensee. Omitting quality control terms in a trademark licence, which can jeopardize distinctiveness under Trademarks Act s. 50. Leaving ownership of improvements and derivative works unaddressed. Confusing a licence with an assignment, so the parties disagree about who owns the IP. Failing to say what happens to inventory, sublicences and data on termination.