Licensing your rights

Licensing your IP can be advantageous as a revenue stream. It allows you to profit from your ideas and can also be beneficial as a method for partnering with others to help you expand into new markets and reach new audiences. In this Step, you’ll explore licensing options and discover how different approaches suit different contexts.

The UK Intellectual Property Office’s definition of a licence is ‘an agreement between you, as the IP rights owner, and another party. It grants them permission to do something that would be an infringement of your rights without the licence.’ This means that you can allow another individual or organisation to benefit from using your IP, and in return you can stipulate that they pay you a fee or a portion of the profits, which would usually be in the form of royalties. Here, you are licensing out your IP.

Here are some well-known examples of IP owners who licensed out their IP, leading to substantial revenue generation.

• J.K. Rowling and her Harry Potter series (the works are protected by Copyright). In October 1998, Warner Bros. purchased the film rights to the first four novels for a seven-figure sum. Since then, NBCUniversal has purchased the television rights and the Wizarding World franchise from Warner Bros. The Wall Street Journal has valued this rights agreement at a quarter of a billion dollars¹.
• Dr Gary Michelson (his inventions are protected by Patents) is a retired orthopaedic and spinal surgeon who holds some 340 U.S. patents for orthopaedic and spinal surgery instruments. He is named as the sole inventor on the patents and his inventions are used throughout the world to treat debilitating conditions. His patents were licenced to Medtronic, an international medical device maker².
• Manchester United Football Club (their brand is a protected Trademark). A wide variety of clothing including sports, training and leisure wear, features the official Manchester United brand and, along with other merchandise from coffee mugs to bedspreads, toys to keyrings, these products have generated over a £100million a year in revenue. The Club licences rights in its Trademarks (including the name and the logo) to manufacturing partners who produce official merchandise³.

Alongside revenue generation, licensing can also provide significant strategic benefits including:

• Sharing costs and risks: by allowing a third party to manufacture and/or sell products that use your IP, you can avoid production, marketing and distribution costs and their associated risks.
• Increasing your market reach: you can partner with an organisation that already has a foothold in the market you wish to sell into. For example, they can sell your product in territories (i.e. countries) you don’t have access to.
• Saving time and resources: in many cases manufacturers are set up to develop and produce items for global markets. You can therefore save time and resources by using their expertise to develop the product for you.

Subsidiary Rights

A common practice is for IP owners to licence subsidiary rights (also known as sub rights). These are further rights which are generated after the first inception of a product/service. They are typically attached to works that are literary, dramatic or musical in nature (protected by copyright). If we use a novel as an example, the first rights would have been sold to a publisher to make a book available to readers. These are the volume rights. In addition, the publisher is likely to have also licenced the following subsidiary rights:

• Digital Rights (for eBooks)
• Translations Rights (to translate and sell the same text in different languages)
• Audio Rights (to produce Audio Books)
• Serial Rights (this is when a book is published in successive parts in a newspaper or magazine).

It is now common practice for authors to retain further sub rights which could bring in future revenues through the IP being exploited in other formats such as:

• Dramatic (Film, Television, Stage, Radio)
• Merchandise
• Multimedia (e.g. video games).

Similarly, sub rights can be a lucrative revenue stream for music artists. Here are some ways that musicians can make additional revenue through licensing:

• Synchronisation Licence (or Sync Licence) for use with visual media, such as TV shows, films, commercials, news segments, video games and more.
• Mechanical Licence used for the reproduction of the song in physical form, most often CDs.
• Public Performance Licence encompasses radio, websites, stores, restaurants, music venues, nightclubs, and other public spaces.
• Master Recording Licence, also called a master use licence or master licence, which grants the recipient the right to use the entirety or any parts of the original sound recording. This is common with compilation albums like “Top 20s”.
• Print Licence primarily used to reproduce sheet music or lyrics for karaoke, merchandise, marketing materials, and more.
• Blanket Licence allows users to have access to a portion or complete collection of songs for a flat annual fee, which can be convenient for places that want to use it as background music, like a shopping centre⁴.

Take a look at this short film about the various subsidiary rights in ‘Hamilton’ that Lin-Manuel Miranda exploited, to see how important they are in creating additional revenue streams.

As new technologies and opportunities became available, the nature of these subsidiary rights change and evolve. However, the core principle is that IP owners are compensated for the use of their ideas in different formats. In each case, licence fees are determined by:

• how the IP will be used
• who will have access to it
• and for how long.

If you negotiate terms with a third party to licence your IP, we recommended that you speak with a legal professional who can support you through the process. (Why you should use an IP attorney).

Now move onto the next Step to start identifying the subsidiary rights in your idea.

References

1. Rieff (2019) NBCUniversal Buys Harry Potter rights in Enormous Franchise Deal. Investopedia/News/Company News.
2. Key (2021) How Billionaire Inventor Dr. Gary Michelson Negotiates Licensing Deals. Forbes/Small Business/Entrepreneurs.
3. Manchester United Investor Relations (2025) accessed from MANUTD.com
4. How does Music Licensing Work? Indie Music Academy (2024).