sublicensing

Sublicensing is the act by which a licensee of intellectual property grants rights to a third party to exercise some or all of the licensed rights, under the terms of the original license. A sublicense does not transfer ownership of the IP; it extends usage rights to another party while remaining subject to the licensor’s rights and the original license terms. Sublicensing is typically permitted only with the licensor’s consent, or when the license expressly grants sublicensing rights. When allowed, the sublicense is usually bound by the same scope and limitations as the original license, including field of use, geography, duration, and any requirements related to quality control, confidentiality, and payment.

Liability and administration commonly fall on the original licensee. The licensor continues to look to the licensee for compliance and performance, and may maintain enforcement rights against both the licensee and the sublicensee. The sublicensee is generally treated as a downstream party whose rights fail if the licensor terminates the primary license or if the license is violated. Reporting, audits, and royalties or pass-through payments often flow through to the licensor via the licensee, depending on the contract.

Common contexts for sublicensing include software libraries embedded in products, OEM arrangements, distribution agreements, and franchising or brand co-operation where a primary licensee grants downstream rights to manufacturers, service providers, or distributors. In patent licensing, sublicensing can enable downstream manufacture or exploitation of a patented invention, subject to the original license’s restrictions.

Key distinctions include the difference between sublicensing and assignment: a sublicense grants usage rights to a third party under the original terms, while an assignment transfers the underlying license or ownership of the rights, often requiring broader consent and more extensive legal formalities.