Licence Agreements Explained: Types, Legal Formalities and Pitfalls (UK) | LegalDocuments.co.uk

At a glance

• What it is: a contract letting one party (the licensor) permit another (the licensee) to use an asset they own, usually IP, on defined terms, without transferring ownership.
• Not the same as an assignment: an assignment transfers ownership outright and, for copyright, must be in writing signed by the assignor under section 90(3) of the Copyright, Designs and Patents Act 1988. A licence leaves ownership with the licensor.
• Three commercial categories: exclusive (only the licensee, excluding even the licensor), sole (licensor plus one licensee, no one else), non-exclusive (licensor can license multiple parties). Only "exclusive licence" is a term defined in statute — separately, but consistently, for each right: section 92(1) CDPA 1988 (copyright), section 130(1) Patents Act 1977 (patents), section 29(1) Trade Marks Act 1994 (trade marks).
• Writing and signature rules differ by right: every trade mark licence must be in writing and signed by the grantor (s.28(2) TMA 1994); only an exclusive copyright licence must be (s.92(1) CDPA 1988); patent licences carry no equivalent statutory requirement, though a written agreement is always sensible.
• Sub-licensing is not a default right: it exists only where the head licence expressly allows it (s.30(4)(a) Patents Act 1977; s.28(4) TMA 1994).
• Registration affects money and standing, not validity: an unregistered exclusive patent licence, or any unregistered trade mark licence, can lose the right to recover costs if the right is infringed before registration (s.68 Patents Act 1977; s.25(4) TMA 1994) — and an unregistered trade mark licensee also loses statutory infringement protections until registration is applied for (s.25(3) TMA 1994).

What this document is

A licence agreement is a contract in which one party (the licensor) gives another party (the licensee) permission to use something the licensor owns or controls, on defined terms, for a defined period, usually in exchange for payment. Ownership does not transfer.

The licensee gets a bundle of permissions — for example, to reproduce software, manufacture a product under a patent, sell branded goods, or occupy a property — within the limits the agreement sets out. Licences can cover almost any asset: copyright works, trade marks, patents, registered and unregistered designs, confidential know-how, databases, software, and even land or equipment.

The scope of what's licensed, where it can be used, how long the rights last, what the licensee can and cannot do, and what happens if either side breaches the terms are all matters for the agreement itself. Because the default position in English law is that the owner keeps all rights not expressly granted, drafting matters enormously.

A licence that says too little leaves the licensee exposed; one that says too much can tie the licensor's hands for years. And, for registered rights in particular, a licence that is never recorded at the UK Intellectual Property Office can leave the licensee unable to recover its own legal costs if something goes wrong.

Types of licence: exclusive, sole and non-exclusive

Only one of these three labels has a fixed legal meaning. "Exclusive licence" is defined separately in each of the main UK IP statutes, and each definition is built the same way: the licensee is authorised to the exclusion of all other persons, including the person granting the licence.

• Copyright: section 92(1) of the Copyright, Designs and Patents Act 1988 — an exclusive licence "means a licence in writing signed by or on behalf of the copyright owner authorising the licensee to the exclusion of all other persons, including the person granting the licence".
• Patents: section 130(1) of the Patents Act 1977 — the same exclusion principle, expressed for patents and applications.
• Trade marks: section 29(1) of the Trade Marks Act 1994 — the same test again, for registered trade marks.

Note the copyright definition folds a formality requirement into the definition itself: an exclusive copyright licence is not exclusive in the statutory sense unless it is also in writing and signed. Get the label right but skip the paperwork, and you may not actually have what the Act calls an exclusive licence.

"Sole licence" and "non-exclusive licence" are commercial and drafting conventions rather than terms fixed by any of these Acts. A sole licence sits between the two extremes: the licensor keeps the right to use the asset itself, but agrees not to license anyone else. A non-exclusive licence allows the licensor to grant the same rights to any number of licensees. Because "sole" has no statutory definition, the agreement itself has to do all the work of pinning down exactly what it means — don't rely on the label alone.

The commercial trade-off runs in one direction: exclusivity is scarcer and normally commands a higher price, more due diligence from the licensee, and stronger obligations (minimum sales, active exploitation, use-it-or-lose-it clauses) from the licensor.

The legal framework

Four Acts govern most UK licensing, and each treats formalities and registration slightly differently. Getting the right Act — and the right section — matters more than most licensors realise.

| Right | Formality for a licence | Key sections | Registration effect | |---|---|---|---| | Copyright | Only an exclusive licence must be in writing and signed (s.92(1)). Non-exclusive licences can be less formal, though this is risky. | CDPA 1988 ss.90–92 | No register exists for copyright; the issue doesn't arise. | | Patents | No statutory writing requirement for the licence itself (only assignments/mortgages, s.30(6)), but always advisable in practice. | Patents Act 1977 s.30, s.130 | Unregistered exclusive licence risks losing costs on infringement unless registered within 6 months (s.68). | | Registered trade marks | Every licence must be in writing, signed by the grantor (s.28(2)) — no informal route. | TMA 1994 s.28, s.29 | Unregistered licence loses statutory infringement protections until registration applied for, and costs risk if infringed first (s.25(3)–(4)). | | Registered designs | No general statutory writing requirement for the licence itself; recordal is a separate step. | Registered Designs Act 1949 s.19 | Licence can be recorded on the register of designs. |

Two things are worth stating plainly, because they're the most common source of confusion. First, "in writing" for these purposes almost always means signed by (or on behalf of) the person granting the right — an exchange of emails describing terms is not automatically the same thing, and for trade marks and exclusive copyright licences the signed-writing requirement is not optional. Second, none of these formality rules require the licence to be registered at the UKIPO to be valid between the parties — registration is a separate, additional step that mainly affects your ability to recover costs and enforce the right against third parties, covered below.

How to use this document

1. Identify exactly what is being licensed. Before you think about royalties or territory, pin down the asset itself. Is it a specific patent, a piece of source code, a trade mark registration, a manuscript, a database? Describe it precisely in the agreement, ideally with registration numbers, version numbers, or a schedule listing each item. Vague descriptions are the single most common cause of licensing disputes.
2. Decide on the scope of rights granted. Work out whether the licence is exclusive, sole or non-exclusive; which territories it covers; which fields of use are permitted; and whether sub-licensing is allowed — remember sub-licensing is not a default right for patents or trade marks (see the FAQ below). Each of these is a commercial lever. The broader the grant, the more the licensee pays, or should. Narrow the grant where you can, because anything not granted stays with the licensor.
3. Match the formality to the right being licensed. If any part of the grant is an exclusive copyright licence, or any part of it is a trade mark licence, it must be in writing and signed to be effective at all — see the table above. For patents and non-exclusive copyright, writing isn't strictly compulsory but should still be treated as non-negotiable for anything commercially significant.
4. Agree financial terms and reporting obligations. Royalties, lump sums, minimum guarantees, advance payments, milestone fees — there are many ways to structure the money, and none of it is set by statute. Whatever you choose, build in clear reporting obligations, audit rights, and deadlines. A royalty without a proper reporting mechanism is almost impossible to enforce.
5. Address quality control, warranties and indemnities. Particularly for trade mark licences, the licensor needs the right to control quality: section 28(5) of the Trade Marks Act 1994 specifically lets a proprietor treat a licensee's breach of duration, form, scope, territory or quality terms as trade mark infringement, so these clauses carry real teeth, not just contractual consequences. Consider what warranties each side can honestly give about ownership and non-infringement, and how indemnities will work if a third party brings a claim relating to the licensed asset.
6. Decide whether to register the licence at the UKIPO. For an exclusive patent licence or any trade mark licence, weigh the cost and admin of recording it against the risk of losing costs recovery or infringement standing if you don't (see below). Current UKIPO forms and fees are on GOV.UK.
7. Plan termination, consequences and what happens next. How long does the licence run? Can either party terminate for convenience, or only for breach? What happens to stock in hand, customer relationships, sub-licensees and confidential information when the agreement ends? Exit provisions are often neglected in negotiation and then become critical in practice.

Worked examples

Software licence (non-exclusive, copyright). A SaaS company licenses its platform to business customers on a non-exclusive basis — thousands of customers use the same software under materially the same terms. Because it's non-exclusive copyright, there's no statutory requirement that it be in writing and signed (unlike a trade mark licence), but the company still puts full written terms in its click-through agreement, because "non-exclusive and informal" would leave scope, liability and termination all open to argument. Sub-licensing is expressly prohibited, so a customer can't resell access to a third party.

Trade mark licence to a manufacturer (exclusive, quality-controlled). A fashion brand grants an exclusive licence to a single UK manufacturer to produce and sell branded homeware. Because this is a trade mark licence, it must be in writing and signed by the brand owner under section 28(2) TMA 1994, no informal version would be effective. The agreement includes detailed quality-control provisions covering materials, finish and approval of new product lines — because section 28(5) TMA 1994 means a serious breach of those terms can be treated as trade mark infringement, not just a contract claim, giving the brand owner a stronger remedy than damages for breach of contract alone.

Patent licence, registered to protect a future claim. An inventor grants an exclusive licence to manufacture a patented component. The licensee's legal team registers the licence at the UKIPO within a few weeks of signing. Eighteen months later, a competitor infringes the patent. Because the licence was registered well within the 6-month window in section 68 of the Patents Act 1977, the licensee can recover its legal costs for the infringement action. Had it not registered the licence at all, and the competitor could show it acted before any registration, the licensee could have won the case on liability and still been refused its costs.

Common mistakes and risks

• Vague descriptions of the asset. "The software" or "our designs" invites disputes about exactly what was licensed. Use registration numbers, version numbers or a schedule.
• Treating "sole" as a defined legal term. It isn't. If the agreement doesn't spell out exactly what "sole" means for your deal, don't assume it protects you the way "exclusive" does under the statutory definitions.
• Skipping the writing requirement because "it's just a licence". For any trade mark licence, and for any exclusive copyright licence, the agreement is not legally effective without a signed written document — this isn't best practice, it's the statutory test (s.28(2) TMA 1994; s.92(1) CDPA 1988).
• Assuming sub-licensing is automatically allowed. For patents and trade marks it isn't, unless the head licence says so (s.30(4)(a) Patents Act 1977; s.28(4) TMA 1994). Silence in the agreement means no sub-licensing right exists.
• Never registering an exclusive patent licence or a trade mark licence. This doesn't make the licence invalid, but it can cost the licensee its legal costs in an infringement action, and for trade marks it also removes statutory infringement protections until registration is applied for (s.68 Patents Act 1977; s.25(3)–(4) TMA 1994).
• No quality-control terms in a trade mark licence. Beyond commercial risk to the brand, section 28(5) TMA 1994 only gives the proprietor infringement-style remedies against a licensee who breaches specific categories of term (duration, form, scope, territory, quality) — if those terms were never written into the licence, there's nothing to enforce under that section.
• No exit plan. What happens to unsold stock, sub-licensees, and confidential information at termination is frequently left to be argued about after the relationship has already broken down.
• Reacting to a breach without first checking the licence terms and your registration position. If a licensee is operating outside the scope you granted, that may look like both a contract breach and, for a trade mark, potential infringement under s.28(5) TMA 1994 — see our guide on cease and desist letters for how to approach the first formal step, and our guide on the challenges of enforcing IP rights for what enforcement in the UK actually involves.

Licensing at the UK Intellectual Property Office

Recording a licence on the UKIPO's registers is optional, but for patents and trade marks it is rarely optional in practice once you understand the consequences of not doing it.

For patents, section 68 of the Patents Act 1977 provides that where someone becomes an exclusive licensee "by virtue of a transaction" and the patent is later infringed before that transaction is registered, the court will not award them costs or expenses for that infringement — unless the transaction was registered within 6 months of its date, or the court accepts it wasn't practicable to register sooner and it was done as soon as practicable after.

For registered trade marks, section 25 of the Trade Marks Act 1994 goes further. The grant of a licence is a "registrable transaction" under section 25(2)(b). Until an application to register it is made, section 25(3) says the transaction is ineffective against anyone who later acquires a conflicting interest in ignorance of it, and the licensee does not get the statutory infringement protections that sections 30–31 of the Act give to a properly recorded licensee. Section 25(4) then applies the same 6-month costs rule as the patents regime: if the mark is infringed before the licence particulars are registered, no costs are awarded unless registration was applied for within 6 months (or as soon as practicable thereafter).

For registered designs, section 19 of the Registered Designs Act 1949 lets a party with an interest under a licence, mortgage or other instrument apply to have that interest recorded on the register of designs, on proof of title to the registrar's satisfaction.

Copyright and unregistered rights have no register at all — recording a licence simply isn't a step that exists for them.

If the asset you're licensing is a granted patent, a registered trade mark or a registered design, and the deal is commercially significant, check the current UKIPO forms and fees on GOV.UK and factor recordal into your post-signing checklist, not as an afterthought.

Licence vs assignment

The two are often confused because both can be the subject of the same negotiation, but they do fundamentally different things. An assignment transfers ownership: once it takes effect, the assignor no longer owns the right. A licence only grants permission to use the right; ownership stays where it was.

The formality gap matters here too. Copyright assignments must be in writing and signed by the assignor to be effective, under section 90(3) of the Copyright, Designs and Patents Act 1988 — that's a hard rule with no exceptions, unlike copyright licences, where only the exclusive kind carries the same requirement. Patent assignments and mortgages must equally be in writing and signed under section 30(6) of the Patents Act 1977.

If you're not sure which document you actually need — permission to use, or a permanent transfer of ownership — see our companion guide on assignment agreements, which covers the transfer side of this same question in detail, including what happens to jointly created IP and how ownership disputes commonly arise.

This is legal information, not legal advice. It explains the law of England and Wales in general terms as at the review date below, and does not take account of your specific circumstances. Reading it does not create a solicitor-client relationship. LegalDocuments.co.uk is not a law firm and is not regulated by the Solicitors Regulation Authority. For advice tailored to your situation, speak to our telephone legal advice service or consult a regulated solicitor.

Last reviewed: August 2026 by a non-practising solicitor · Next review due: August 2027 or on legislative change.