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What is an Exclusive License?

By Christy Bieber
Updated May 16, 2024
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An exclusive license is a legally enforceable promise that the individual granted the license is the only person allowed to do a specific activity. Most commonly, exclusive licenses are used in the case of intellectual property. The individual granted the license is the only one allowed to produce, distribute or otherwise benefit from the intellectual property.

There are many situations in which an exclusive license may be granted. First, such a license may be granted to an author of an original work who copyrights that work. Under United States law, the writer of a book, for example, is granted the exclusive rights to distribute and sell the book. The same is true of a painter of a picture or of a composer of a song; they too may be given the exclusive rights and license to the distribution of their art.

A person who owns a patent is also given an exclusive license under the law. No other individual or company is permitted to make, distribute or sell the patented product or invention while the patent holder holds the license. For example, if someone invents a formula that creates a drug that cures the common cold and patents it, he will have the exclusive rights — in the form of a license issued by the patent office — to make and distribute the formula until the patent runs out.

Trademarks are another situation in which exclusive licenses protect the rights of the owner of intellectual property. Louis Vuitton, for example, has the exclusive license to make and distribute purses with colorful interlocking LVs. It owns the identifying mark, and if someone else begins to produce bags with its logo on them without permission, the designer can sue in court and collect damages.

While the concept of exclusive licenses thus most commonly exists when the government grants such a license in the form of intellectual property protections, the government is not the only one who can grant an exclusive license. Manufacturers or individuals who own the rights to a product or idea can also grant such a license. For example, a movie studio might wish to produce a popular action figure doll based on one of the characters in a movie. The studio may then grant a particular toy maker the exclusive rights to make the product; the studio may also grant a particular toy reseller an exclusive license to be the only toy company permitted to sell the product on its shelves.

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Discussion Comments
By anon298963 — On Oct 22, 2012

What are the permissions and licenses required to produce bags?

By EdRick — On Jun 23, 2011

@rugbygirl - Yes, drugs are under patent for a while, and then after the patent expires, other companies can also make it. I wonder if they often become available without a prescription at the same time? I mean, I know a drug has to be safe to be offered without a prescription, but the drug companies make more money when it's prescription because insurance companies will pay more than people will (I think).

The drug you're thinking of was a hormone to prevent miscarriage/preterm birth. Compounding pharmacies used to make it quite cheap, but the FDA was worried about consistency and quality. Now only one company can make it, and they've jacked up the price like hundreds of times. Then they reduced it; now, instead of costing an arm and a leg, it only costs an arm. It's basically a form of progesterone.

By rugbygirl — On Jun 21, 2011

Does the patent licensing thing apply to drug companies? Is that why some drugs aren't available in generics--because the company has a patent?

I feel like I heard something recently about a drug company getting an exclusive license to make some important drug that they were charging a whole lot of money for.

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