Data Licensing: Key Considerations for Ownership and Use

Introduction

In today’s digital economy, data is a valuable business asset that can be leveraged for competitive advantage, operational improvements, and commercial licensing. Companies frequently enter into agreements involving data sharing, usage rights, and intellectual property (IP) protections. Whether data is being licensed as the core focus of a transaction or as part of a broader commercial agreement—such as a technology services contract—ensuring clear terms around data ownership, permitted use, and security is essential.

Understanding Data Licensing

Because data may be protected by copyright, trade secret laws, or contractual rights, third-party use often requires a license from the data owner or a sublicense from an authorized party. While data licenses share similarities with other types of IP agreements, they introduce unique considerations related to:

• Data ownership and control
• Use of original, derived, and aggregated data
• Confidentiality and security obligations

Data licensing terms become particularly important when a service provider processes customer data and generates new insights, analytics, or aggregated datasets. In such cases, both the vendor and the customer may have competing interests regarding who owns the processed data and how it can be used.

Key Issues in Data Licensing Agreements

Data Ownership Considerations

Ownership of data is a critical issue in licensing agreements. Whether the data licensor is a vendor or a customer, the agreement should explicitly define ownership rights to prevent disputes and protect business interests.

Licensor’s Perspective (Protecting Data Assets)

The party providing the data (licensor) should ensure the agreement clearly establishes its ownership rights by:

• Including a specific acknowledgment from the licensee that the data remains the sole and exclusive property of the licensor.
• Defining licensed data narrowly to control how the licensee can use the information.
• Reserving rights over any additional uses of the data, potentially requiring additional fees for expanded usage.

For example, a licensor may require the agreement to state that the data was developed at significant expense and represents proprietary trade secrets, is subject to copyright protections if it qualifies as a compilation under intellectual property laws, and cannot be modified, repurposed, or sublicensed without explicit approval.

By establishing these provisions, the licensor retains maximum control over how its data is used and monetized.

Licensee’s Perspective (Ensuring Business Needs Are Met)

The party receiving the data (licensee) must ensure the agreement grants sufficient rights to use the data effectively. The licensee may seek:

• Broad data usage rights to analyze, process, and generate insights from the licensed data.
• The ability to create derivative works or aggregated datasets based on the original data.
• Ownership rights over newly generated data if the licensee’s proprietary algorithms or tools add significant value.

In service agreements, the customer (data licensor) may also want to retain ownership over processed data by specifying that all “Customer Data” is owned by the customer, including any data processed or stored by the vendor, that any derivative works based on customer data are also customer-owned, covering modifications, adaptations, and data enhancements, and that usage data collected from the service remains under customer control.

Data Use and Restrictions

A well-drafted data licensing agreement should establish clear limitations on how the data can be used by the licensee.

Licensor’s Considerations

To protect confidential information and prevent misuse, the licensor may impose the following restrictions on the licensee:

• Use limitation – The licensee may only use the data for a specific, agreed-upon purpose (e.g., service delivery).
• Confidentiality obligations – The licensee must keep the data secure and cannot disclose it to unauthorized parties.
• No secondary use – The licensee cannot repurpose the data for its own commercial benefit, unless explicitly permitted.
• No transfer or sublicensing – The licensee cannot share, transfer, or sublicense the data without prior approval.

Licensee’s Considerations

The licensee should ensure that the agreement allows sufficient flexibility to use the data in ways that align with its business needs. Depending on the nature of the transaction, this may include analyzing customer data for internal insights to improve services, aggregating data for industry benchmarking or trend analysis, and using anonymized or de-identified data for research or product development.

If the licensee expects to commercialize derived data, the agreement should clearly outline what types of data usage are permitted, any revenue-sharing arrangements for monetized insights, and whether anonymization of data changes ownership rights.

By carefully negotiating data use provisions, both parties can strike a balance between protecting valuable data assets and enabling business innovation.

Security and Compliance Considerations

When licensing data that includes sensitive information, security and compliance obligations should be carefully defined. Key provisions include:

• Data security policies – The licensee must follow industry best practices for storing and handling data securely.
• Compliance with data protection laws – The agreement should specify adherence to applicable privacy laws, such as Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA).
• Incident response and breach notification – The licensee must notify the licensor promptly in case of a data breach.
• Data deletion requirements – The agreement should outline whether the licensee must delete or return data upon contract termination.

These provisions help ensure that both parties remain compliant with regulatory requirements and protect sensitive business data from security threats.

Key Takeaways

• Clearly define data ownership to specify whether the licensor or licensee owns original, processed, and usage data.
• Set boundaries on data usage to establish what the licensee can and cannot do with the data.
• Ensure security and compliance by requiring adherence to privacy laws and security best practices.
• Negotiate rights for derived and aggregated data to address how newly generated datasets will be handled.

As data continues to grow in importance as a business asset, companies must ensure their licensing agreements are comprehensive, enforceable, and aligned with their business objectives.