What is the difference between a licence and an assignment of IP under Australian law?

A licence and an assignment are the two primary ways to deal with intellectual property rights under Australian law, and they have fundamentally different legal effects. An assignment transfers ownership of the IP from the assignor to the assignee permanently — after a valid assignment, the assignee becomes the new owner and the assignor has no further rights in the IP. An assignment of a registered trade mark must be in writing under s106 of the Trade Marks Act 1995 (Cth), and an assignment of a patent must be in writing under s14 of the Patents Act 1990 (Cth). In contrast, a licence does not transfer ownership — it grants the licensee a permission or right to use the IP on specified terms, while the licensor retains ownership. Licences are more flexible: they can be time-limited, territory-restricted, use-restricted, exclusive or non-exclusive, and are generally the preferred commercial mechanism when the owner wants to retain long-term control, derive ongoing royalty income, and licence the same IP to multiple parties in different markets or fields.

How are royalties taxed under a licensing agreement in Australia?

Royalties paid under an Australian licensing agreement are generally subject to Goods and Services Tax (GST) at 10% under the A New Tax System (Goods and Services Tax) Act 1999 (Cth), where the supply is made in the course of an enterprise and the licensor is registered (or required to be registered) for GST. The licensor must issue a tax invoice for each taxable supply and the licensee may claim an input tax credit if it is registered for GST and the licence is for a creditable purpose. Royalties must also be recognised as assessable income by the licensor under the Income Tax Assessment Act 1997 (Cth). Where royalties are paid to a non-resident licensor, the Australian licensee is generally required to withhold royalty withholding tax at 30% under s128B of the Income Tax Assessment Act 1936 (Cth), subject to a reduction under any applicable double tax treaty. Parties should obtain advice from a registered tax agent or solicitor regarding the income tax and GST treatment of specific royalty arrangements.

Does an exclusive licensee have the right to sue for IP infringement in Australia?

Yes, in most cases an exclusive licensee has standing to sue for infringement of the licensed IP in Australia. Under s119 of the Patents Act 1990 (Cth), an exclusive licensee may bring infringement proceedings in the Federal Court of Australia, with the licensor joined as a defendant if they are not a co-plaintiff. Under s10 of the Copyright Act 1968 (Cth), an exclusive licensee of copyright also has standing to commence infringement proceedings in their own right. For trade marks, a registered user may take action under s26 of the Trade Marks Act 1995 (Cth) if the licence is recorded on the Trade Marks Register, though the trade mark owner's consent is generally required. Non-exclusive licensees generally do not have independent standing to sue for infringement and must rely on the licensor to take action. This is a key reason why licensees negotiating high-value licences often seek exclusive licence terms, and why the distinction between exclusive, sole, and non-exclusive licences matters significantly in practice.

What happens to improvements made by the licensee during the licence term?

The ownership of improvements made by the licensee to the licensed IP during the licence term is determined by the terms of the licensing agreement, and this is one of the most commercially significant provisions to negotiate. Under Australian law there is no automatic rule vesting improvements in the licensor — if the agreement is silent, improvements created by the licensee may be owned by the licensee under the general principles of the Patents Act 1990 (Cth) and Copyright Act 1968 (Cth). A licensor wishing to retain control will typically include a clause in the agreement providing that all improvements and modifications to the Licensed IP vest in the licensor upon creation, with a licence back to the licensee to use those improvements during the term. Alternatively, the parties may agree on joint ownership or a right of first refusal. The agreement should also address improvements made collaboratively, where joint inventorship under s15 of the Patents Act 1990 (Cth) may give rise to joint ownership, and whether any improvements should be reported and disclosed promptly to the licensor.

Should an IP licence be recorded with IP Australia?

Recording a licence with IP Australia is not mandatory but is strongly recommended for registered IP rights. For trade marks, recording a registered user arrangement under the Trade Marks Act 1995 (Cth) provides the licensee with a degree of protection and ensures the trade mark use by the licensee is authorised use under s8, which is critical to maintaining the validity and distinctiveness of the mark. For patents, a licence can be noted on the Register of Patents under s187 of the Patents Act 1990 (Cth), which provides notice to third parties who might otherwise acquire an interest in the patent without notice of the licence. Registered designs under the Designs Act 2003 (Cth) can similarly be dealt with on the Designs Register. Recording a licence does not affect its validity between the parties, but it does give third parties notice and may be relevant to priority disputes. There is no equivalent register for copyright licences in Australia, as copyright arises automatically and is not registered.

Licensing Agreement (Australia) — Australia

Grant or obtain a comprehensive licence to use intellectual property — including patents, trade marks, copyright works, and technical know-how — in Australia with this professionally drafted Licensing Agreement. Covers exclusive, non-exclusive, and sole licence structures under the Patents Act 1990 (Cth), Trade Marks Act 1995 (Cth), Copyright Act 1968 (Cth), and Designs Act 2003 (Cth). Includes royalty and lump-sum payment provisions, GST compliance under the A New Tax System (Goods and Services Tax) Act 1999 (Cth), sublicensing rights, IP maintenance obligations, improvement ownership, audit rights, confidentiality, limitation of liability consistent with the Australian Consumer Law, and post-term non-competition provisions.

What Is a Licensing Agreement (Australia)?

A Licensing Agreement is a legally binding contract under which the owner of intellectual property (the Licensor) grants another party (the Licensee) permission to use, exploit, or commercialise that intellectual property within defined limits, in exchange for payment such as royalties or a licence fee. Unlike an assignment, a licensing agreement does not transfer ownership of the IP — the Licensor retains full ownership and the Licensee acquires only the specific rights expressly granted in the agreement.

In Australia, intellectual property rights are protected by a suite of Commonwealth legislation. The Patents Act 1990 (Cth) protects inventions for up to 20 years (standard patent) or 8 years (innovation patent, now closed to new applications). The Trade Marks Act 1995 (Cth) protects registered signs that distinguish the goods or services of one trader from those of another, with registration renewable every 10 years. The Copyright Act 1968 (Cth) automatically protects original literary, artistic, musical, and dramatic works as well as films, sound recordings, and computer programs, for the life of the author plus 70 years. The Designs Act 2003 (Cth) protects the visual features of manufactured products for up to 10 years from registration. Any of these IP assets — and confidential information or technical know-how — can be the subject of a Licensing Agreement.

A Licensing Agreement must identify the specific IP being licensed, state whether the licence is exclusive, non-exclusive, or sole, define the territory and permitted use, specify the royalty structure and payment terms, address GST obligations, allocate IP maintenance responsibilities, regulate sublicensing, address ownership of improvements, and set out termination rights. A well-drafted agreement also includes confidentiality obligations to protect technical know-how and trade secrets disclosed to enable the Licensee to exercise the licence.

Bundle licences — which cover a package of IP rights such as a patent, related trade mark, software, and accompanying know-how — are common in franchise, technology transfer, and manufacturing licensing contexts.

When Do You Need a Licensing Agreement (Australia)?

A Licensing Agreement is required whenever a business or individual wishes to commercialise intellectual property owned by another party, or to grant a third party the right to use their own IP assets. This document is essential in a wide range of commercial scenarios across Australian industries.

A technology company that has developed proprietary software, algorithms, a patented process, or specialised technical know-how may enter into a licensing agreement to monetise those assets without transferring ownership. A manufacturer holding a registered trade mark or patent may licence those rights to a distributor or production partner, enabling them to market or manufacture products in a designated territory while the IP owner retains control over quality and brand integrity.

Franchise arrangements typically involve a licensing agreement by which the franchisee is granted a licence to use the franchisor's trade marks, business systems, copyright materials, and know-how. Licensing agreements are fundamental to the franchise model under Australian franchise law and the Franchising Code of Conduct.

In the resources, agricultural, and manufacturing sectors, businesses frequently licence patented technology or proprietary processes to local operators or joint venture partners. Universities and research institutions regularly licence patented inventions, copyright software, and technical know-how to commercial partners for product development and commercialisation under research commercialisation agreements.

A Licensing Agreement is also appropriate when a business wishes to expand into new geographic markets by appointing a licensee in that territory, or when a rights owner wants to generate recurring royalty income from IP assets that would otherwise remain unused. In Australia's media and entertainment sector, music publishers, film studios, and content creators routinely licence their catalogues to streaming platforms, broadcasters, and distributors.

Without a written Licensing Agreement, the scope of the licence, the royalty entitlement, ownership of improvements, and termination rights are all uncertain — creating significant legal and commercial risk for both parties.

What to Include in Your Licensing Agreement (Australia)

A comprehensive Australian Licensing Agreement must address several key elements to be legally effective and commercially protective for both parties.

Identification of the Licensed IP: The agreement must precisely identify the intellectual property being licensed, including registration numbers, application numbers, filing dates, and a clear description of the IP. Vague or incomplete identification may make it impossible to determine what has been licensed.

Licence type and scope: The agreement must specify whether the licence is exclusive, non-exclusive, or sole. An exclusive licence bars even the Licensor from granting licences to others in the Territory; a sole licence bars further licensing to third parties but allows the Licensor to continue using the IP; a non-exclusive licence allows the Licensor to grant the same rights to multiple licensees.

Territory and permitted use: The geographic area within which the licence applies must be expressly defined. The permitted use must be described with sufficient specificity to prevent the Licensee from using the Licensed IP beyond what is intended — each unauthorised use may constitute infringement.

Royalties, payment, and audit rights: The royalty structure must clearly define how royalties are calculated (percentage of net sales, flat fee, or combination), when they are payable, what reporting obligations apply, and when the Licensor may audit the Licensee's accounts. GST of 10% generally applies to royalty payments.

Ownership of improvements: The agreement should expressly address who owns any improvements or modifications to the Licensed IP made by the Licensee during the licence term. Without express provision, disputes over improvement ownership are common and commercially costly.

IP maintenance and enforcement: The Licensor is generally responsible for maintaining registrations and renewing IP rights at its own cost. The Licensee should be obliged to notify the Licensor of any infringement and the agreement should allocate the right and obligation to take enforcement action.

Confidentiality: Where the licence involves the disclosure of technical know-how, trade secrets, or proprietary information, a robust confidentiality clause is essential to prevent the Licensee from using that information outside the scope of the licence or after termination.

Termination provisions: The agreement should clearly set out when each Party may terminate, what notice is required, what rights survive termination, and what the Licensee must do with materials incorporating the Licensed IP after termination.

What Is a Licensing Agreement (Australia)?

When Do You Need a Licensing Agreement (Australia)?

What to Include in Your Licensing Agreement (Australia)

Frequently Asked Questions

Related Documents

IP Licence Agreement (Australia)

IP Assignment Agreement (Australia)

Non-Disclosure Agreement (NDA) (Australia)

Franchise Agreement (Australia)

Distribution Agreement (Australia)