Under a licensing arrangement, a third party (the licensee) is granted a limited right to use your invention or other IP for some specific commercial purpose. This might also include the right to sub-license others. The right would normally last for as long as the IP protection is in place (e.g. up to 20 years in the case of a successful patent application).

A good licence will set out clearly the exact rights that are being granted (whether exclusive, non-exclusive, in certain countries only, for certain products/sectors only, etc) as well as the payments that the licensee will make, and the sales and other reports that they must provide to the licensor. It will state the arrangements (often mediation) for resolving any disputes that might arise, and will specify the term, jurisdiction and governing law for the agreement.

Under a licensing arrangement, the licensor continues to own the IP, and may be able to terminate the licence if the licensee is not complying with the agreed terms. In this way the owner of the IP can retain a reasonable degree of control over how the technology is commercialised.

It is important not to agree to any terms or to sign any licence or other agreement without the assistance of your HEI's technology transfer/commercialisation staff. They have the experience and resources needed to ensure that your interests - and those of your institution - are properly represented and protected.