Licensing Fee

Posted in Finance, Accounting and Economics Terms, Total Reads: 940

Definition: Licensing Fee

Licensing fee is an amount in form of a use tax paid to various government bodies for the granting of a license to carry out any activity, such as operating a certain business, increasing the capacity of production of certain products or practicing certain profession. License fees are a substantial source of income for state and local governments and are mostly imposed in lieu of taxes which entail legislative approval. It is also used for the amount paid to any individual or institution to use a copyrighted material that belongs to them.

In particular, a license could be issued by authorities, to permit an activity that would otherwise be prohibited. It may entail paying a fee and/or demonstrating a capability. The prerequisite may also assist the authorities in being informed on a type of activity, and to provide them the opportunity to establish conditions and limitations.

A licensor may grant a license in accordance to the intellectual property laws to sanction a use (such as copying any software or borrowing a patented invention) to a licensee, saving the licensee from the claim of infringement brought upon by the licensor. A license given under intellectual property normally has numerous components besides the grant itself, including provisions like term, territory, renewal and other restrictions deemed important by the licensor.

Term: It defines the particular length of time for which the license is valid. This protects the licensor, if the value of the license increase in future, or the market conditions change. It also ensures enforceability by making sure that no license extends its term underlined in the agreement.

Territory: It defines the territory the license pertain to. For example, a license stated with a territory limited to "South East Asia" would not permit a licensee any defence from actions for use in the United States.

It is irrefutable that intellectual property licensing plays a pivotal role in today's business and economic scenario. Business concepts such as technology transfer, franchisee, publication and character merchandising entirely function on the licensing of intellectual property. Licensing has also been accepted as an independent branch of law. It has been created out of the interaction of the doctrine of contract and the codes of intellectual property.

For example, Restaurants in order to serve liquor must obtain a liquor license and pay a certain licensing fee.

If an apparel company owner wants to sell t-shirts and shorts imprinted with a English Premier League football team's logo, the owner would require to get the English Premier League’s and the team’s permission and have to pay a licensing fee to obtain the right to use the logo.


Hence, this concludes the definition of Licensing Fee along with its overview.

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