I have recently attended a great seminar on business licensing.

Indeed, licensing can be a great way to grow a business and widen one’s streams of passive income.

Licensing has an obvious advantage over franchising in that it imposes substantially less mandatory requirements over the licensor.

It may appear that licensing is some kind of franchising-lite.

Whether or not it is so, it is very important to keep one thing in mind.

By definition, a license is a permission to do something that no one would have the right to do without such permission. A license is not a right, it’s a permission.

The corollary from this definition is that for there to be a valid license, the license should cover something that you can legally stop others from doing. Just like it would be very difficult to enforce a license that allows someone to breathe in exchange for a 10% royalty, it would be difficult to enforce a license pursuant to which a business is licensing something that is readily available to the public without any restrictions.

Aside from properly documenting your intellectual property in the form of copyright, trademarks and patents, you should also take great care in keeping your secrets secret. If you fail to secure your confidential information, you may one day find yourself in a courtroom with a judge who would have little sympathy to your attempts to force a competitor pay you for something that you neglected to protect. Unless your IP is properly protected, you cannot license it out. Let me rephrase that. You may be able to license it out, but it would be difficult for you to enforce the terms of such license.

Intellectual property is an important (and sometimes, the most important) asset of your business. Whether or not your strategy involves licensing your business systems to others, you should always keep in mind that your actions have consequences.

If building business assets is a part of your strategy (and it should be), then having a meaningful IP strategy is a must!