Use intellectual property to grow your business

If you own intellectual property (IP) but lack the resources or expertise to bring it to market, you can license it to another business.

A licence allows another business to use your IP to manufacture, distribute or sell products or services. In return, they pay you royalties. These may be a percentage of the income they generate from your IP, or a fixed or variable fee.

You can license different types of intellectual property, including:

• patents
• designs
• trade marks
• copyright

Types of intellectual property licences

There are several different types of IP licences that you can grant:

Non-exclusive licences

You can grant these to as many people and businesses as you like. This can increase your market reach but may be harder to manage. You may also earn lower royalties.

Exclusive licence

This gives one licensee full rights to use your IP. It often results in higher royalties, but you give up control over how your IP is used.

Sole licence

This allows one licensee to use your IP, but you keep the right to use it yourself. It offers more flexibility than an exclusive licence, but returns may be lower.

Choosing the right licensee

Choose licensees carefully to maximise the value of your IP. Look for businesses that:

• have the skills and resources to develop your product
• have strong distribution networks
• have a good reputation and track record

This helps protect your brand and ensures your IP is used effectively.

Agreeing IP licensing terms

Before licensing your IP, agree clear terms with the licensee. These should include:

• how fees and royalties are calculated and paid
• what the licensee is allowed to do (eg manufacture or distribute)
• if sub-contracting is allowed
• the territories covered by the agreement
• how long does the licence last
• how the agreement can be ended
• responsibilities, indemnities and insurance requirements

GOV.UK provides further information on licensing intellectual property.

Legal considerations

Some IP transactions may be subject to regulation. For example, under the UK National Security and Investment Act 2021, certain deals involving IP in sensitive sectors may need government approval. Check if you need to tell the government about your acquisition.

If you do not want to, or cannot, exploit your intellectual property (IP), you can sell it to someone else. Selling your IP gives you a one-off payment for the time and money you invested. The buyer then has full rights to use the IP.

Valuing your intellectual property for sale

Intellectual property is an intangible assets, so it can be difficult to value. However, it often plays a key role in creating competitive advantage.

Common ways to estimate IP value include:

• comparing what similar assets have sold for
• estimating future income the IP could generate
• calculating the cost of creating or replacing the asset

For more information, see tips on business asset valuation and guidance on valuing your intellectual property.

IP sale agreements

Most IP sales are agreed at a fixed price. However, some agreements include additional payments - for example, if certain targets are met.

You can limit the sale by geographical area (territory). For example, you might sell the rights for one country but keep rights elsewhere.

You can sell your IP to anyone you choose. However, if you sell a patent, registered design or trade mark, you must notify the Intellectual Property Office.

Advantages and disadvantages of selling your IP

Advantages

• You get guaranteed payment upfront.
• You avoid any ongoing management or involvement.

Disadvantages

• Your returns are limited to the sale price.
• You lose control over how the IP is used.
• You will get no future income from the asset.

Consider these factors carefully before deciding whether to sell or license your IP.

Legal considerations

Some IP transactions may require government approval. Under the UK National Security and Investment Act 2021, certain IP deals in sensitive sectors may be subject to review. Check if you need to tell the government about your acquisition.

Product distribution involves complex planning and logistics, including order handling, stock control, storage, packing and delivery. If your business lacks the time or resources, you can outsource distribution to a specialist logistics company.

Protect your intellectual property when outsourcing distribution

When outsourcing distribution, you must protect your confidential information and intellectual property (IP). Include clear IP clauses in your outsourcing agreement to define ownership, usage rights and protections during and after the contract.

Key IP risks

Outsourcing can expose your business to several risks, including

• disputes over IP ownership 
• loss of sensitive business knowledge 
• unauthorised use or disclosure of confidential information 

Carry out due diligence

Before agreeing to any outsourcing arrangement, carry out a full IP risk assessment. This should help you:

• identify which IP assets are most risk
• confirm ownership rights before signing the agreement
• asses potential risks with the distributor (such as past misuse of IP)
• understand how your IP rights will be protected, especially in overseas markets
• determine the best ways to safeguard your IP

Choose a distributor with a strong reputation, relevant experience and the capability to handle your product effectively.

Advantages of outsourcing distribution

Working with a reputable distributor can offer several benefits:

• local knowledge of markets, regulations and customs
• responsibility for warehousing and transport
• support with international expansion
• potential marketing support
• access to established distribution networks or brands
• reduced financial risk, such as credit risk from customers

Disadvantages of outsourcing distribution

Outsourcing your distribution involves handing over control of all distribution-related activities to a third party. This comes with certain risks, including:

• reduced control over pricing or marketing
• pressure to offer discounts or favourable credit terms to the distributor
• pressure to sign long-term exclusive contracts that could lock you in if things fail

Read more about the advantages and disadvantages of outsourcing.

How to negotiate a distribution agreement

Your distribution agreement clearly define:

• the territory covered
• whether you can still sell products directly
• whether other distributors can be appointed
• pricing and payment terms
• credit arrangements
• performance targets and incentives
• contract length and renewal terms
• conditions for early termination

When you are choosing a distributor, select one who can maximise sales and represent your brand effectively. If entering a new market, choose a partner with strong local knowledge. Businesses offering complementary products can also make effective distribution partners.

Find more tips to help you choose an outsourcing partner.

Franchising is a popular way to grow a business. It allows you to expand into new markets, increase revenue and scale your operations in a cost-effective way. It can also help you enter new markets quickly and build a competitive advantage.

How franchising works

In a franchising model, you allow another business (the franchisee) to sell your products or services under your brand. The franchisee uses your intellectual property (IP), including trade marks, copyright, know-how and your business model. In return, they typically pay:

• an initial franchise fee
• ongoing royalties (usually a percentage of sales or profits)

You may also earn income by supplying products or services to your franchisees. As the franchisor, you usually provide training, guidance and ongoing support.

Advantages of franchising for growth

Franchising offers several benefits, including:

• predictable income from fees and royalties
• lower financial risk, as franchisees fund their own operations 
• reduced management costs, as franchisees run their own businesses
• faster expansion into new markets

Disadvantages of franchising for growth

Since franchisees are separate businesses in their own right, certain risks need to be considered. For example:

• less control over how your brand is used
• potential reputational risk if franchisees perform poorly
• reliance on independent businesses to maintain quality standards

It is important to weigh these risks and consider the full advantages and disadvantages of franchising your business.

How to negotiate a franchise agreement

A written franchise agreement is essential. It should clearly define:

• the territory covered by the franchise
• whether the agreement is exclusive or non-exclusive
• the rights to use your intellectual property
• any restrictions on the franchisee’s activities
• the support you will provide
• fees and royalty payments
• the length of the agreement
• renewal and termination condition

Read more about the key issues in the franchise agreement for a franchisor.

Choosing the right franchisee

Select franchisees carefully to protect your brand and maximise growth. Look for partners who understand your business model, have relevant experience or market knowledge, and can maintain your standards and reputation.

Intellectual property (IP) is a valuable business asset. Knowing how to protect and use it can help you reduce risk and grow your business. A range of UK organisations can support you with IP advice, training and tools.

Get support in the UK and Northern Ireland

If your business is based in Northern Ireland, Invest Northern Ireland (Invest NI) can provide technical advice on protecting and managing your IP.

The Intellectual Property Office (IPO) offers online guidance, events, training and specialist courses for businesses. Its free IP Health Check tool helps you review what IP you own, how to protect it and how to use it more effectively. After answering a short set of questions, you receive a tailored report with suggested actions and links to further guidance.

Use the IPO Health Check and see their other online support tools.

International IP support

If you operate across borders, you can also access wider support. The European IPR Helpdesk provides guidance for EU-funded research and innovation projects, as well as SMEs involved in transnational partnership agreements. The European Patent Office also provides support and information for businesses developing and commercialising inventions.

For global guidance and practical tools, World Intellectual Property Organization (WIPO) offers international IP resources for businesses, including support for innovation, commercialisation and IP management. Its services include global databases, training resources and guidance on protecting and using IP across multiple countries.

Why this support matters

Using IP advice and tools can help you protect your business assets, reduce legal and commercial risks, make informed decisions about using your IP and maximise its commercial value.