Meaning of License and Types of License in the Business World

Meaning of License – In the business world we have often heard the term license. Whether it’s a business in the form of selling goods or offering a service, licensing is so important. Why is it so important to have a license in the business world?

Simply put, a license can protect the business you run. So that you will also better understand what a license is. Then you can read the explanation in this article.

This article will explain everything related to the license. Ranging from the meaning of the license, benefits to the types of the license itself.

Definition of License

Before going into a deeper discussion, of course the first thing we will discuss first is the meaning of the license itself. A license is the granting of permission to carry out a production process, both in the form of goods and services.

Where the product or service has previously been patented by its creator for the first time. In addition, licenses are often referred to as the granting of permission to intellectual property. Where later the licensor will give a permit (license) to the recipient in order to be able to use it for production or service needs.

In the license there is also a term license agreement. A license agreement can be done for two or more parties. Where later one party will be the licensor and the other party will be the recipient of the license.

Later, the licensee can easily take advantage of the permission to produce goods or services legally. The licensor is usually referred to as the licensor. While the license recipient is referred to as the licensee.

Types of Licenses

Once you know the meaning of license. Then the next is an explanation about the types of licenses. Where actually licenses are divided into several types. Each type of license always has its own importance.

Therefore, for those of you who want to make a license, it’s best to know the types of licenses first so that you don’t make a mistake in making the license.

1. HKI License (Intellectual Property Rights)

The first type of license is HKI or intellectual property rights license. Among other types of licenses. Maybe you will also hear this type of license more often.

In this type of IPR license there are some rules that apply. For example, such as the territory of use, renewal and some other rules that have previously been determined by the owner of the license.

A simple example is a license to computer software. Where later the licensor can grant rights to the user of their software.

2. Bulk License

Next there is a type of mass license, most of this type of license will be easier to find on computer software. In detail, the type of mass license written on computer software is UELA or End User License Agreement.

Simply put, the type of mass license is the granting of a license from the licensee to an individual in order to be able to use the computer software.

3. License of Goods and Services

Further there is a license for goods and services. Those who hold this license can grant permits or licenses to individuals and other companies. The purpose of doing this is so that individuals or other companies can sell products and services that are under the license holder.

Both individuals and companies can sell products or services from the main licensee without having to fear any legal claims.

4. License of Artwork or Character

The same is the case with goods and services licenses. This type of license for artwork or characters can also be given to other parties in order to be able to sell a product that has artwork or characters in it.

5. Education License

Finally there is a license in the field of education. This type of license is usually in the form of an academic degree. For example, a university is a licensee. The university can give its license to its students so that they can gain knowledge in a certain period of time at the university. In addition, a license in the field of education can also be given in the form of an award.

Well those are some types of licenses that you often find in everyday life. Further, Reader can learn more about the advantages of having a license.

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Licensing Advantages

It should be known that having a license also has some advantages, you know. Both for goods and services and other types of licenses have their own advantages. Well, if indeed you don’t really know what the advantages of the license are. Then the explanation below can help you.

  1. Those who receive a license can use the trademark legally.
  2. The licensor will get a royalty that has previously been agreed upon the amount to be paid.
  3. Licensors no longer need to incur additional costs in order to commercialize their products.
  4. The licensee will find it easier to gain trust from consumers. Especially if the brand they use is already famous.

Lack of License

Licensing does not only have advantages. But the license also has some drawbacks. Well, so that you can also better understand what are the shortcomings of the license. Here is a complete explanation about it.

  1. When the license has been sold, then the previous license owner has lost complete control over the product.
  2. Those who receive a license also have the risk of product sales.
  3. Although you can get royalties, everything takes time.
  4. When the agreement has been violated by those who received the license. So there is a high possibility of a competition. Of course, this can also threaten the legitimacy of the license owner’s trademark.

License Legal Policy

License also has its own legal basis. In 2018, in July to be exact, the government issued new regulations related to license agreements, namely Government Regulation No. 36 of 2018 on the Registration of Intellectual Property License Agreements (PP 36/2018).

This license has been regulated by other legal regulations that are included in the field of intellectual property rights. It has also been mentioned in Article 2 paragraph (1) of PP 36/2018 that registration of licenses can be done on intellectual property objects in several areas such as:

  1. Copyright and related rights
  2. Patent
  3. Brand
  4. Industrial design
  5. Integrated circuit layout design
  6. Trade secret
  7. Plant varieties

Prohibitions Contained in the License Agreement

In the license agreement there are several prohibitions as explained in Article 6 PP 36/2018. Where in the license agreement it is not allowed to do or have the content of some things like the explanation below.

  1. License agreements made can harm Indonesia’s economy as well as Indonesia’s national interests.
  2. Licensing agreements can create restrictions that may hinder the ability of Indonesians to transfer, master and develop technology.
  3. The license agreement may result in unfair competition.
  4. A license agreement that is made contrary to legal regulations, religious values, morality and public order.

From the explanation of some points above, you can make sure again before making a license agreement. Rechecking the contents of the license agreement file will make it easier for you to avoid various risks of violations.

Creation of License Agreement

The first thing you must know before making a license agreement is the expiration date of the Intellectual Property Rights. Where it is very important because you cannot make or accept a license agreement as long as the Intellectual Property Rights that have been licensed have expired and have been deleted.

In addition, the process of making a license agreement must be in Indonesian. Then what if a license agreement is made with a foreign party? License agreements can still be done with foreign parties as long as the foreign language used also has an Indonesian translation. This has also been regulated in Article 4 paragraph (2) PP 36/2018.

In Article 7 paragraph (2) PP 36/2018 has also provided a guide related to the contents of the license agreement. Some of the contents that should be contained in the license are as follows.

  1. Date, month, year, and place the agreement was signed.
  2. Name and address of licensor and licensee.
  3. Object of the license agreement.
  4. The terms of the license, whether exclusive or non-exclusive, including sublicense.
  5. Duration of the license agreement.
  6. Territory of validity of the license agreement.
  7. The party that pays the annual fee for the patent.

Registration of License Agreement

Making a license agreement is arguably not as simple as when you make a cooperation agreement that only requires signatures from both parties. However, the creation of a license agreement requires several processes first.

In Article 10 paragraph (1) of PP 36/2018 it has been explained that in making a license agreement you must submit a written application to the Minister through the Directorate General of Intellectual Property using Indonesian.

Later, the application can be made through electronic or non-electronic media. In addition, in order for the submitted application to be stronger, there are also some requirements that must be completed first.

Some of the requirements to complete the application for making a license agreement are as follows.

  1. Copy of License Agreement;
  2. Official Citation of Patent Certificate, Trademark Certificate, Industrial Design Certificate, Integrated Circuit Layout Design Certificate, proof of ownership of Inventions or Related Rights, or proof of ownership of licensed Trade Secrets;
  3. Power of Attorney, if the application is submitted by Power of Attorney; and
  4. Proof of payment of fees.
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Term of License Agreement

As in the form of an agreement in general that has a valid period. The license agreement also has a validity period. The period of validity of the license agreement depends on the period of the license agreement that has been agreed upon by the parties concerned.

According to Article 17 paragraph (2) of PP 36/2018, when the validity period of the license agreement has ended. Then you can apply for re-registration as long as the license agreement will also be renewed or followed up during its validity.

The difference between a license and a franchise

Although it looks the same between license and franchise. However, the two actually have differences that are quite prominent. Compared to license, maybe you hear the term franchise more.

However, for the difference between the two, either license or franchise, you can read the full explanation below.

1. Definition of License and Franchise

From the meaning, both license and franchise have differences. Franchise itself is an agreement or bond between two or more parties. Where later one of the parties can grant a benefit right and use the right from the existing intellectual property.

Simply put, a franchise is a grant of authority for a brand or product so that it can be resold according to an agreement or agreement that has been made previously. In addition, the franchise process cannot be done casually. There must be a notary and have approval from the Ministry of Law and Human Rights.

As for the license itself, it is the granting of a permit so that production actions can be carried out both for products and services. Which products and services have been patented by the first inventor.

From the explanation above it can be concluded that franchise is more towards consumption. As for the license itself, it is more directed to the production process.

2. License and Franchise Legal Policy

Next, in terms of legal basis, both licenses and franchises have different legal bases. The legal basis of franchise is article 5 of government regulation 42/2007. Where the content is to regulate the personal data of the parties, types of intellectual property rights, business activities, rights and obligations of each party, facilities to marketing provided by the franchisor to the recipient, the duration of the agreement, compensation payment procedures, up to extension and termination procedures agreement.

Then for the basis of license law is government regulation 36/2018. Where the rules used have content about the recording of intellectual property license agreements. The content regulates copyright and related rights, patents, trademarks, industrial designs and layouts, and trade secrets.

3. Rights and Obligations

Both franchise and license both have different rights and obligations. In franchise there is the term franchisor which is used for the owner or franchisor. While the term franchisee is the term given to those franchisees.

Those who become franchisors have an obligation to provide names, recipes, products and various matters related to the sale of franchises in accordance with the agreement that has been made previously.

While those who receive a franchise have the authority to use brands, products and recipes from the grantor in order to get results. Then for the obligation on the part of the franchisee is to provide the company so that the franchise agreement can take place.

Then for the license itself there is a term licensor or creator is a person or a group who discovers or creates a product that has special properties. Creations from the licensor have various forms. Starting from art, the field of science, literature that is born from inspiration, ability, thought to imagination that is created in real form.

Then there is also the term licensee or copyright holder. Where the licensee is the party that legally receives the copyright from the licensor. Simply put, the obligation of the licensor is to grant a license to the licensee in order to be able to produce a product or service.

Which standards and quality have been determined by the licensor. Then for the licensee himself, he must produce and sell using copyrighted brand products and give royalties in accordance with the previous agreement.

That’s some explanation about the meaning of the license and other things related to the license that you can read in full above. At least by reading the explanation above, it will be easier for you to make a license agreement.