Licensing

A license is simply the right to do or to use something. The word, from Latin, means "permission," thus implying that a license is given by a party who controls something to another. Licenses divide into three basic forms: 1) the right or permission to carry out an activity otherwise regulated or prohibited by government; 2) the right to use a name, image, or representation (including a brand) in packaging, promotion, signage, marketing, and similar contexts; and 3) the right to use and apply proprietary know-how, whether patented or not, for any legal purpose, including its integral embodiment in products. Licensing activity comes in two forms: Licensorsgive licenses to others; licensees receive licenses from others.

Terminology

The word itself, licensing, does not cover all forms and instances of the underlying relationship. For example, users of other people's patents are typically "licensed" to do so, but users of other people's copyrights are said to have "permission" to do so. In municipal government, many activities require "permits." These are functionally identical to licenses in that the permit holder must qualify in some way and is subject to rules. In commercial relationships a franchise is said to be "held" ("franchise holder"), but to franchise someone is equivalent to two forms of licensing (image and know-how). "Certification" is a widely used alternative, as in "Certified Public Accountant"; the CPA, however, is typically licensed by the state. "Certification" connotes something more advanced or refined than "licensing," hence is used in relation to professional permits—but professions well known to be of a high order of skill disdain from using the term. It is impossible to find a "certified physician" or "certified attorney" even though they are all licensed by the state. Conversely, when in ordinary speech someone is referred to as a "certified idiot," we know that the idiocy is of a high order.

GOVERNMENT LICENSING

The most common form of licensing is the governmental kind. After all, most adults are licensed drivers. But state government, in addition, licenses many skilled and professional occupations, including those that form the core of many small business activities. Small business, therefore, is most likely to be touched by this form of licensing. Municipal government issues all kinds of permits, equivalent to licenses. In Miami-Dade County, Florida, for instance, the county requires that all businesses have "occupational" licenses—but here in the sense of occupying a store.

A surprisingly large number of occupations are subject to license. In the state of Rhode Island, for example (picked at random), the state licenses 149 occupations. Thirty-two of those 149 occupations are architects and attorneys; barbers, but also beekeepers and boxers; chiropractors; dieticians, also dentists, and anyone associated with dog racing; electricians as well as professional engineers; funeral directors and buyers of fur at wholesale; hairdressers, cosmetologists, estheticians, and manicurists; investment advisers; occupations associated with the sport Jai Alai; lottery agents and livestock dealers; massage therapists; every kind of professional level nurse and midwife; occupational therapists and opticians; plumbers and physicians; real estate brokers; speech-language pathologists and many school-related occupations; travel agents and tattoo artists; veterinarians; wildlife rehabilitators; and even professional wrestlers.

The rationale behind licensing of occupations is obviously varied and based on the enforcement of health, safety, commercial, and other laws. One rationale behind Rhode Island's licensing of beekeepers, for instance, is to control importation of bee hives from another state, on which a fee is levied. In 2002, the state issued 160 such licenses, managed by its Division of Agriculture and Resource Marketing. Licensing of Jai Alai occupations is evidently part of enforcing gambling rules by the state's Division of Racing and Athletics; in 2002, the state issued 319 such licenses. In professional categories educational requirements must be met. A nurse-midwife, for example, must have completed "an approved educational program in midwifery that is accredited by the American College of Nurse-Midwives." The licensing is handled by Rhode Island's Office of Health Professions Regulation, part of its Department of Health. In 2002, 69 licenses were issued; Jai Alai wins by a wide margin.

Most businesses affected by licensing rules learn of these requirements in the course of qualifications or startup. Information on rules is, however, widely and easily available. The small business owner wishing to check on his or her need for such licensing might begin at the Web site of America's Career/InfoNet (see references) where access is provided to every state's occupational licensing requirements.

IMAGE LICENSING

Marketing of goods and services relies, in the first place, on capturing a potential customer's attention and then holding it by inducing a favorable reaction. Famous icons—be they celebrities, cartoon figures like Mickey Mouse, or widely recognized symbols like the letters NFL, GM, IBM or the five interlocking rings of the Olympics—have a function in attracting attention and in passing on the values that they represent to objects or messages to which they are attached. Icons are created in commerce by arduous performance and promotion, in which case they are brand identities; they are also "borrowed" or "recruited" by associating famous names with products. For purposes of brevity, all of these recognizable symbols may be summed up as "images." Images are licensed for the purpose of helping people market goods.

Underlying such licensing is law which protects brands, logos, and other trade-marked symbols from use by others; individuals also have the right to permit or to restrict their names from commercial exploitation by others. Thus, for instance, a newspaper may use the name Schwarzenegger in a headline but cannot label its paper as "The paper Schwarzenegger reads each day" without the California Governor's express permission. Should such permission be forthcoming, the paper would belicensed to use the name.

According to Stuart Elliott in The New York Times, citing The Licensing Letter published by EPM Communications, retail sales of licensed products in North America were $70.5 billion in 2004; based on the phrasing the number includes Canadian sales. But if all these sales had taken place in the U.S., they would have represented a mere 1.8 percent of total retail sales of $3,850 billion in 2004—thus a quite negligible portion of the total. Elliott also reports that such sales were down 1.3 percent from 2003. Amy Johannes, writing for Promo put worldwide retails sales at $175.3 billion in the same year, citing License! magazine. (Johannes' headline mistakenly shows $1.75 billion.) These two numbers indicate that image licensing affects a tiny proportion of sales at retail and therefore represents a sometimes-used marketing tactic.

KNOW-HOW OR TECHNOLOGY LICENSING

Many inventors and technology companies use patented methods and closely-held practices as the basis of licensing activity. Under a know-how or technology license, the licensee is enabled to deploy a design or use a patented process in his or her own manufacturing activities. The practice is as old as patent law and is present in all of the modern arts of production. Wherever the focus of invention is most intense, there new technologies spring up and are spread by licensing. In the mid-2000s these techniques were mushrooming in electronics, pharmaceuticals, genetic manipulation, alternative energy, and exotic materials technologies, while, at the same time, continuing in traditional fields like mechanics and chemical and petrochemical processing.

Whereas image licensing is likely to be extremely rare in small business, virtually every small business engages in licensing some know-how—although the vast majority would be surprised to learn this. So would the vast public engaged in the same activity: the use of computer software takes place under a license that comes with the software itself. The licensing agreement explicitly prohibits using a purchased package on more than one machine. Such practices are extremely common and also difficult to police. In the international field piracy is a constant refrain. Confusion appears to reign domestically. As Computer Trade Shopper reported, "SMEs are failing to recognize the implications of not meeting licensing requirements, with only 56 per cent having a formal licensing policy. According to research by PC World Business (PCWB), 58 percent did not keep records of the software they owned or file license certificates, but 87 percent believed they were compliant." (SMEs are "small to medium enterprises.") At the same time, as Ed Foster reported in InfoWorld, pressures are mounting to bring small business into compliance. "Under the name of the Business Software Alliance (BSA)," Foster wrote, "Microsoft and its allies continue to bombard small businesses with anti-piracy mailings demanding that customers audit their licensing compliance; it is becoming pretty obvious who the real buccaneers are in search of plunder." The message in these developments for the small business owner is that he or she is engaged in licensing, knowingly or not, and that it might require a closer look.

LICENSING IN, LICENSING OUT

Using software purchased from others—or operating a proprietary process under a license—is to be "licensing in." But the small business may also have an opportunity to "license out " if it has made a useful invention which may be of interest to others. In most cases the activity of licensing others is a new business in its own rights with unique activities and problems, of which the first may be patenting the invention itself to secure all rights to the new art. The activity is relatively easy if the company experiences positive demand for its invention and buyers are calling or visiting. When not, help from an experienced patent attorney may be the best first step in examining the feasibility of turning invention into profit.

see also Brand Equity; Inventions and Patents; Licensing Agreements; Royalties

BIBLIOGRAPHY

"Branding News: Danger Mouse in clothing range." Marketing. 18 January 2006.

"Davy Process Technology (London, UK) has secured a second Chinese licensee in a month for its ethyl acetate technology, the only such technology to be based on bioethanol as feedstock." Chemistry and Industry. 6 February 2006.

Elliott, Stuart. "The Media Business: Advertising—Addenda; Licensed Products Fall 1.3% in Sales." The New York Times. 10 January 2005.

Foster, Ed. "The Gripe Line: BSA's truce campaigns—So-called anti-piracy truce campaigns leave customers feeling more like the distrusted enemy than a valued partner." InfoWorld. 27 August 2001.

Henricks, Mark. "License to Thrive: How you can profit from big companies' tech ideas." Entrepreneur. October 2005.

Johannes, Amy. "Live from Licensing International: 2004 Sales Reach $1.75 B." Promo. 6 October 2005.

"Licensed Occupations." America's Career/InfoNet. Available from http://www.acinet.org/acinet/licensedoccupations/lois_agency.asp. Retrieved on 4 April 2006.

Murphy, Terry. "The Licensing Handbook: How to make money in licensed products and stay out of trouble." Impressions. March 2006.

Rhode Island Department of Labor and Training. "Rhode Island Licensed Occupations." Available from http://www.dlt.ri.gov/lmi/jobseeker/license.htm. Retrieved on 5 April 2006.

Rivkin, Victoria. "Licensing Gets Bag Designer in Gear: Deal gives Yasmena manufacturing chops to expand its market; preserving its options." Crain's New York Business. 5 December 2005.

"SMEs Confused Over Licensing Needs." Computer Trade Shopper. 12 October 2005.

                                Darnay, ECDI

LICENSE

The permission granted by competent authority to exercise a certain privilege that, without such authorization, would constitute an illegal act, atrespassor atort. The certificate or the document itself that confers permission to engage in otherwise proscribed conduct.

A license is different from a permit. The terms license and permit are often used interchangeably, but generally, a permit describes a more temporary form of permission. For example, if a homeowner seeks to make structural additions to her property, she may have to apply for permits from local land-use and zoning boards. These permits expire on a certain date or when the work is finished. By contrast, the contractor who completes the work will likely hold a local license that allows her to operate her business for a certain number of years.

Licenses are an important and ubiquitous feature of contemporary society. Federal, state, and local governments rely on licensing to control a broad range of human activity, from commercial and professional to dangerous and environmental. Licenses may also be issued by private parties and by patent or copyright holders.

Government Licenses

The great many activities that require a license issued by a government authority include fishing; hunting; marrying; driving a motor vehicle; providing health care services; practicing law; manufacturing; engaging in retail and wholesale commerce; operating a private business, trade, or technical school; providing commercial services such as those offered by whitewater rafting outfitters and travel agencies; providing public services such as food and environmental inspection; and operating public pinball machines.

Not all persons engaged in a licensed activity need to obtain a license. For example, the owner of a liquor store must obtain a license to operate it, but the cashiers and stock persons need not obtain a license to work there. By contrast, not only does a dentist have to obtain a license to conduct business in a dental office, but dental hygienists and other dental assistants must each have a license to work in the office.

A license gives a person or organization permission to engage in a particular activity. If the government requires a license for an activity, it may issue criminal charges if a person engages in the activity without obtaining a license. Most licenses expire after a certain period of time, and most may be renewed. Failure to abide by certain laws and regulations can result in suspension or revocation of a license. Acquiring a license through fraud or misrepresentation will result in revocation of the license.

Licenses are issued by the administrative agencies of local, state, and federal lawmaking bodies. Administrative agencies are established by legislative bodies to regulate specific government activities and concerns. For example, the U.S. Congress and state legislatures have each created an agency that exercises authority over environmental issues. This agency usually is called a department of environmental protection or of conservation. It is responsible for issuing licenses for activities such as hunting, fishing, and camping. If the same agency has authority over environmental cleanups, it also may be responsible for issuing licenses for inspectors and businesses that specialize in waste management and removal. Specific boards or divisions within an agency may be responsible for issuing licenses.

The licensing process helps to control activity in a variety of ways. License application procedures allow government authorities to screen applicants to verify that they are fit to engage in the particular activity. Before any license is issued by an agency, the applicant must meet certain standards. For example, a person who seeks a driver's license must be at least age 16, must have passed a driver's test and a vision test, and must pay a fee. If an applicant is under age 18, the state department of motor vehicles may require that the applicant obtain the signature of a parent or guardian. If the applicant seeks to drive other than a passenger vehicle, such as a motorcycle or semi-truck, the applicant has to pass tests that relate to the driving of that vehicle and obtain a separate license for driving that vehicle.

The requirements for certain business licenses can be stringent. For example, an insurance adjuster in Maine must be at least 18 years old; be competent, trustworthy, financially responsible, and of good personal and business reputation; pass a written examination on insurance adjusting; and have been employed or have undergone special training for not less than one year in insurance adjustment (Me. Rev. Stat. Ann. tit. 24-A, § 1853 [West 1995]). The insurance board can investigate any applicant for an insurance adjuster's license and deny an applicant a license if he does not meet the qualifications.

Such rigorous licensing procedures are usually used if the activity places the license holder, or licensee, in a fiduciary relationship, that is, in a position of confidence and trust with other persons. Such activity usually involves the handling of money or health matters, and includes endeavors like medical care, legal representation, accounting, insurance, and financial investment.

Requiring a license for a certain activity allows the government to closely supervise and control the activity. The agency responsible for issuing the license can control the number of licensees. This function is important for activities such as hunting, where the licensing of too many hunters may deplete wildlife populations and put hunters in danger of stray bullets.

A license is not a property right, which means that no one has the absolute right to a license. The government may decline to issue a license when it sees fit to do so, provided that the denial does not violate federal or state law. No agency may decline to issue a license on the basis of race, religion, sex, national origin, or ethnic background.

The denial of a license, the requirement of a license, or the procedures required to obtain a license may be challenged in court. The most frequent court challenges involve licenses pertaining to the operation of a business. Such was the case in FW/PBS v. City of Dallas, 493 U.S. 215, 110 S. Ct. 596, 107 L. Ed. 2d 603 (1990). In FW/PBS three groups of individuals and businesses in the adult entertainment industry filed suit in federal district court challenging a new ordinance passed by the Dallas City Council. The ordinance placed a number of new restrictions on sexually oriented businesses. Among other things it required that owners of sexually oriented businesses obtain a license, renew it each year, and submit to annual inspections.

On appeal, the Supreme Court upheld a requirement that hotels renting rooms for less than ten hours obtain a special license. The Court held that the city of Dallas's evidence that such motels fostered prostitution and led to a deterioration of the neighborhoods in which they existed was adequate justification for the requirement. However, the Court struck down the application of the licensing requirement to businesses engaged in sexually oriented expression, such as adult bookstores, theaters, and cabarets. The activities of these businesses are protected by the first amendment, and licenses regarding activity protected by the First Amendment must be issued promptly. The Dallas ordinance failed to meet the promptness requirement because it did not limit the time for review of license applications or provide for quick judicial review of license denials. Thus, the Court declared it unconstitutional as applied to businesses engaged in expressive activity.

Private Party Licenses

When a landowner allows a person to do work or perform an act on the landowner's property, the visitor has a license to enter the property. This kind of license need not be signed and formalized: it may be oral or it may be implied by the relationship or actions of the parties. For example, a public utility inspector has a license to enter private property for the purposes of maintaining the utility and gauging consumption. In such a case, the grantor of the license, or licensor, owes a duty to the licensee to make sure the premises are safe for the licensee.

Patent and Copyright Holder Licenses

A license granted by the holder of a patent or a copyright on literary or artistic work gives the license holder a limited right to reproduce, sell, or distribute the work. Likewise, the owner of a trademark may give another person a license to use the mark in a region where the owner's goods have not become known and associated with the owner's use of the mark. These intellectual property licenses usually require that the licensee pay a fee to the licensor in exchange for use of the property. For example, computer software companies sell licenses to their products. In the licensing agreement users are informed that although they possess a disk containing the software, they have actually only purchased a license to operate it. The license typically forbids giving the software to someone else, making copies of it, or running it on more than one computer at a time.

further readings

Antoniak, Michael. 1995. 21st Century Entrepreneur: How to Start a Home Business. New York: Avon.

Gellhorn, Walter. 1956. Individual Freedom and Governmental Restraints. Baton Rouge Louisiana State Univ. Press.

cross-references

Hunting; Patent; Tort Law; Trespass.

Licensing

All commercial launches (or re-entries or landings) conducted by a U.S. company are regulated by the Commercial Space Launch Act (CSLA) of 1984 and its 1988 and 1998 amendments. Under the CSLA, each launch (or re-entry) must have a license. This is true even when launching offshore, as is the case with Kistler Aerospace, which is headquartered in Seattle but launches in Australia, or Sea Launch, a venture composed of Boeing, a Russian company, and a Norwegian company that launches from a ship. These regulations are an outcome of the United Nations's 1967 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies, which places responsibility for any liabilities that might result from a space launch and/or reentry (for instance, if a person or building is hit by a spent rocket stage) on the launching state.

To assure "the public health and safety, safety of property, and the national security and foreign policy interests of the United States," Congress enacted the CSLA and established FAA/AST. The Office of the Associate Administrator Commercial Space Transportation (AST), is part of the Federal Aviation Administration (FAA). Its web site, ast.faa.gov, lists all relevant rules, laws, regulations, and documents necessary to obtain a launch license.

FAA/AST is organized as the Office of the Associate Administrator (the headquarters office of AST); the Space Systems Development Division (SSDD); and the Licensing and Safety Division (LASD). SSDD develops regulations and policy and provides engineering support and forecasting; LASD is the organization that actually evaluates applications and issues licenses. Helping advise FAA/AST is an industry group, the Commercial Space Transportation Advisory Committee (COMSTAC), which FAA/AST established and sponsors. COMSTAC meets quarterly. FAA/AST also licenses spaceport operators (and their spaceports), such as at Cape Canaveral, Florida, and at Vandenberg Air Force Base, California.

FAA/AST officials encourage those seeking a launch license to meet with the organization in "pre-licensing consultations" before submitting an actual license application. FAA/AST conducts a policy review, a payload review, a safety evaluation, an environmental review, and a financial responsibility determination based on the data in the license application. It contacts the applicant if it needs more data or if it requires the applicant to change something to qualify for the license.

Once the official application arrives, FAA/AST has 180 days to issue a license. Since 1984 officials have issued the license in almost every case. There have been only two or three exceptions, and in these cases FAA/AST initially rejected the application because of technical lapses. Once applicants made corrections, the FAA/AST granted the license and the rocket flew. After FAA/AST issues a license, it monitors the licensee through launch to assure compliance with regulations and requirements.

see also Law (volume 4); Law of Space (volume 1); Legislative Environment (volume 1); Regulation (volume 1).

Timothy B. Kyger

Internet Resources

Federal Aviation Administration. <http://ast.faa.gov>.

li·cense / ˈlīsəns/ • n. (Brit. li·cence) a permit from an authority to own or use something, do a particular thing, or carry on a trade (esp. in alcoholic beverages): a gun license [as adj.] vehicle license fees. ∎  formal or official permission to do something: logging is permitted under license from the Forest Service. ∎  a writer's or artist's freedom to deviate from fact or from conventions such as grammar, meter, or perspective, for effect: artistic license. ∎  freedom to behave as one wishes, esp. in a way that results in excessive or unacceptable behavior: the government was criticized for giving the army too much license. ∎  (a license to do something) a reason or excuse to do something wrong or excessive: police say that the lenient sentence is a license to assault.• v. (Brit. also li·cence) [tr.] (often be licensed) grant a license to (someone or something) to permit the use of something or to allow an activity to take place: brokers must be licensed to sell health-related insurance [tr.] he ought not to have been licensed to fly a plane [as adj.] (licensing) a licensing authority. ∎  authorize the use, performance, or release of (something): the drug is already licensed for human use he was required to delete certain scenes before the film could be licensed for showing. ∎ dated give permission to (someone) to do something: [tr.] he was licensed to do no more than send a message. PHRASES: license to print money a very lucrative commercial activity, typically one perceived as requiring little effort.DERIVATIVES: li·cens·a·ble adj. li·cens·er n. li·cen·sor / -sər; ˌlīsənˈsôr/ n.

LICENSING

A license is a permit granted by a government to carry out a regulated activity. Licensing is the most common form and method of health regulation. Most licensing in the United States is done by the states under their police powers. A state legislature must pass a law requiring a license to engage in a specific activity, such as practicing medicine or preparing food. The statute delegates the power to establish the conditions for licensure to an agency such as a department of health, or to a board such as a board of medical examiners. The agency publishes the conditions for licensure, which are often based on national codes, and every license holder must meet these standards. A license holder can be required to give up certain legal rights as a condition of licensure, such as agreeing to allow inspectors into a restaurant without a warrant. A license can be revoked or limited for not complying with the terms of licensure.

Edward P. Richards

(see also: Legislation and Regulation; Police Powers; Public Health and the Law )

Bibliography

Richards, E. P., and Rathbun, K. C. (1998). "Public Health Law." In Maxcy-Rosenau-Last Public Health and Preventive Medicine, ed. Robert B. Wallace. Stamford, CT: Appleton and Lange.