The Cumbrian paper and advanced materials maker said the assets had been sold to an unconnected business that operates in the engineering sector.
The IP was developed by the group’s Centre for Innovation.
The initial consideration is €1.75m, with a deferred amount of up to €250,000, to be payable if a European patent is granted for the know-how before 31 December 2030.
In addition, James Cropper could also receive cash royalties from revenues generated from the use of the IP in the paper, board, pulp and tissue industries over the next nine years, with this sum capped at €2.2m.
The firm also retains the right to use the assets at its own manufacturing sites, under licence, and without any fees.
The name of the purchaser was not disclosed.
James Cropper CEO David Stirling, who took over the top job in January, commented: "I am delighted that we have been able to generate and realise significant value through the development of technology within our Centre for Innovation which will be used to invest in the group's growth strategy.
“The agreed transaction enables us to retain the benefit of these non-core developments, together with the potential to generate further income over the next nine years.”
Shares in James Cropper rose by 4.19% following the news, to 138.05p (52-week high: 440.00p, low: 125.15p).
In November James Cropper downgraded its outlook for the financial year ending 31 March, due to weak demand for luxury packaging materials.
Its share price has declined by nearly 36% since the start of the year.