Operating law and license in France: understand everything to value your assets and secure your contracts

What is a business license?

General definition

One operating license is a contract by which the owner of an intellectual property (IP) right — patent, trademark, copyright, design, software — grants to a third party (The licensee) the right to exploit all or part of this right, under conditions set out in the contract.

Concrete example: An SME holding a patent on an innovation grants a European manufacturer an operating license, allowing him to machine and market the patented product throughout the EU market.

Key points of the operating license:

• Nature of the rights granted : The licensee may, according to the contract, manufacture, sell, sell, distribute, promote or modify the subject of the license.
• Duration and territory : Clarification on the validity period and the geographical area of operation.
• Remuneration : The licensee most often pays a fee to the grantor (fixed amount, percentage of turnover, etc.).
• Obligations and restrictions : Compliance with standards (quality, traceability), information obligations, non-competition clauses, confidentiality clauses, etc.

Educational framework — Why a license?
> An operating license makes it possible to make an intangible asset (patent, brand, software) profitable without definitively selling it. It also offers a solution to accelerate the dissemination of an innovation while maintaining control over its use by others.

The main types of business licenses

Patent operating license

A patent license allows a third party to manufacture, use, or market an invention. She may be exclusive or non-exclusive.

• example : A company holding a patent on a machining technique grants an exclusive manufacturing license for France to a subcontractor. All other manufacturers are then excluded from this market.
• Standard clause :
• Company X grants to company Y, which accepts, an exclusive license to use patent no.... throughout France and for the entire duration of validity of the patent. Under the license, the licensee will be able to manufacture, sell and import the products covered by the patent.

Brand license

The owner of a trademark may authorize a third party to use it, for example in the context of a contract for frankness or partnership.

• example : An SME operating an eco-responsible clothing brand grants an operating license to a regional distributor to market its products under the brand.

Software license

The software license agreement allows the use, reproduction, or modification of software, protected by copyright.

• example : A start-up develops a SaaS application (software as a service) and grants an annual license of use to several SMEs, with restriction to a defined number of users.

Design license

A protected design or model may be subject to an operating license.

• example : A furniture SME grants an operating license on a chair design to a foreign manufacturer for the Asian market.

License to use works subject to copyright

The contract authorizes the reproduction, representation or adaptation of a work (literary, musical, photographic...).

Business law and operating license: what are the differences?

Do not confuse:

• Business license : concerns intellectual property rights.
• Operating permit : concerns an administrative authorization to carry out certain activities (e.g.: drinking establishment, commercial operation of a supermarket, night restaurant).

Example: A restaurant owner in France must have an operating license to open his establishment (a matter under public law), while he will have to negotiate a license if he wants to use a recognized brand for his brand.

The conditions of validity and drafting of an operating license

Essential contract clauses

To secure the relationship, your operating license agreement must include:

• The specific purpose of the license (patent, trademark, software, design, etc.).
• The scope of the rights granted : manufacture, sale, distribution, duration, territory.
• The exclusive or non-exclusive nature.
• Financial conditions : fixed fee, royalties on turnover...
• Guarantees (originality, ownership, validity).
• The distribution of responsibilities (e.g. counterfeiting, hidden defects).
• Licensee control conditions (audits, sales traceability).
• The procedures for early termination and renewal.

Example of a clause — Remuneration

The licensee will pay the grantor an annual fee of €10,000 excluding VAT, plus a variable fee equal to 3% of the turnover achieved through the exploitation of the patent.

Writing best practices

• Anticipate technical developments
• Specify the methods of transmitting know-how (training, technical documentation)
• Define methods for calculating and auditing royalties
• Provide mechanisms in the event of disputes (arbitration, competent jurisdiction)

Lawyer's tip: Adapt each operating license to the reality of your project and to the strategy for valuing your assets.

Exclusive and non-exclusive operating licenses: challenges for SMEs

• Exclusive license : A single licensee has the right to exploit the object of the license within a defined perimeter. Neither the grantor, nor other licensees, can exploit it on this same perimeter.
• Non-exclusive license : The right is granted to several licensees, with the licensor maintaining the right to operate in parallel.

Comparative

Difference between operating license and user license

La operating license confers the right to exploit an intellectual asset commercially (manufacturing, marketing, sublicensing...), while the license of use is limited to the personal or internal use of an invention or software, without the right of direct commercial exploitation.

• Concrete example:
  • Operating license: a distributor may resell the software under their own brand.
  • License of use: a company uses the software for its internal needs, without resale.

Important: Many disputes between business partners arise from the poor definition of the scope of the rights granted by the license.

Procedure and conditions for obtaining a commercial license

To get a license to use a patent or other IP right:

1. Negotiation : Agreement on the purpose, duration, territory, remuneration and obligations of the licensee.
2. Drafting the contract tailor-made, ideally by a specialized lawyer.
3. Registration formalities (for patents, designs, models, trademarks), required from the INPI (National Institute of Industrial Property).
4. Advertising or filing of the contract, in some cases, for enforceability against third parties.
5. Payment of royalties and other obligations.

In terms of commercial license (e.g.: large distribution, store creation, drive...), the manager must request a administrative authorization under the Commercial Code for the creation/extension of a retail business of more than 1,000 m² (specific procedure distinct from IP license law).

Patent license prices and associated costs

Main fees for the grantor:

• Patent filing (INPI) :
  • Request deposit: 26€
  • Research report: €520
  • Delivery: €90
  • Total 1st year: 674€
• Annual taxes : Progressive amount each year (from 38€ the 1st year to 800€ the 20th for maintaining the diploma).

Licensee's remuneration:

• Fixed package (per year or per month) OR
• Royalties (percentage of turnover resulting from exploitation)
• Possibility of combining the two

Additional costs:

• Training and know-how transfer
• Legal fees (contract drafting, legal advice)
• Securities filing and renewal costs

SME tips: Precisely assess the expected return, negotiate a model adapted to your structure, plan how to control the calculation of royalties.

Educational framework: How to properly negotiate your operating license?

• Have your intangible assets audited (patents, brands, software, design...)
• Adapt the contract to your strategy (market, exclusivity, territories, networks, etc.)
• Anticipate potential disputes (mediation clause, competent jurisdiction)
• Integrate reporting and audit requirements to monitor the operation and the calculation of royalties
• Plan training and know-how transfers to maximize valuation
• Always seek the help of a lawyer to secure the editorial office

Business license agreement template (extract)

This excerpt is for illustration purposes only. It will be necessary to adapt it to the specific context of each SME and to consult a lawyer.

“The Licensor grants to the Licensee, who accepts, a license to operate [exclusive/non-exclusive] relating to patent no. [...], valid in the territory of [...], for the duration of the patent. The Licensee will have the right to manufacture, have manufactured, sold, sold and imported the products covered by the patent. In return, the Licensee will pay the Licensor an annual fee of [amount] as well as a proportionate fee of [percentage] on the turnover achieved through the operation.”

Frequently asked questions (FAQ) about business licensing

What is a business license?

An exploitation license is a contract by which the owner of an intellectual property right authorizes another person to use this right in accordance with freely determined terms (object, duration, territory, financial compensation).

What is a business license?

It is an administrative authorization necessary for the exercise of certain regulated activities (refreshment bar, drinking establishment, commercial operation greater than 1,000 m², night restaurant, etc.) It is a matter of public law.

What is an operating system license?

It is a computer license authorizing the use of an operating system (Windows, MacOS, Linux...) on a computer or server. This license covers the installation, reproduction, updating and possible resale.

What is a product license?

It is the authorization by the owner of a copyright, patent or trademark, to exploit this product: manufacture, marketing, adaptation, distribution according to the terms of the license agreement.

Business license form: how do I proceed?

There is no “universal standard form”. Depending on the nature of the asset (patent, brand, etc.), the contract will be tailor-made. Some organizations (INPI, collective management companies, professional associations) offer models that can be adapted to your activity.

Concrete example of a business license

A company that has patented an industrial process grants another (non-competing) company the right to exploit this process on the foreign market, in exchange for the payment of royalties in proportion to the turnover generated.

What is a business license?

It is the authorization to promote a protected innovation or creation on a purely commercial basis (manufacture, sale, sublicense...), according to the terms negotiated in the contract.

What is an operating contract?

This is the contract activating the grant of exploitation rights (patent, brand, software, etc.), specifying all the elements necessary for the secure and effective exploitation of the right.

Difference between license to use and license to operate?

The license of exploitation opens the possibility of commercial exploitation, where the license of use is limited to internal use. This is a central point to be negotiated and formalized in the contract.

What is a commercial exploitation contract?

It is a contract allowing a third party to commercially exploit an asset (model, brand, patent) for the benefit of its own economic development, unlike a simple license of use.

What are the operating conditions?

They are contractually fixed: compliance with standards (techniques, quality), industrial secrecy, methods of calculating fees, reporting obligations, possible exclusivity, etc.

What is the price of a patent license?

The cost includes: patent filing and maintenance fees, remuneration paid to the grantor (fixed, variable), training and know-how transfer fees, and legal fees.

The risks and security of the operating license — Why be accompanied by a lawyer?

The drafting and negotiation of an operating license involves multiple technical, financial and legal challenges. Many disputes arise from errors in scope, remuneration or even violations of IP rights.

This material remains highly regulated : it is therefore essential to consult a lawyer specialized in intellectual property and commercial contracts in order to:

• Adapt the contract to the reality of your business and secure its interests,
• Anticipate the risks of nullity or contestation,
• Control the taxation and valuation of flows related to the license,
• Optimize enforceability against third parties and efficiency in the event of litigation.

What to remember: Any license grant must be contractually supervised to anticipate each situation and maximize the value of your assets.

Conclusion: the operating license, a strategic lever for SMEs

The operating license is proving to be a first-class legal and strategic tool for all innovative SMEs. It makes it possible to promote intangible assets, to accelerate growth, to secure international development and to frame serene partnerships.

Accompanying each stage by a dedicated professional remains essential to best anticipate all the specificities that such an operation raises.

Article written by Guillaume Leclerc, lawyer in commercial contracts and commercial litigation in Paris.