Licensing Agreements

Have you thought about licensing?

Licensing is a practice that has been used for decades. Many of the most successful businesses have expanded their brands and made substantial revenues from licensing. If you are thinking to expand your brand using Licensing Agreements, here is a summary to this legal concept.

Please use this as general information, not as legal advice. It is provided for informational purposes only. If you are considering licensing your brand, we encourage you to work with a legally qualified professional who can draft a licensing agreement.

What is licensing?

Licensing consists in a licensor (owner) giving the licensee (another party) the right to use a certain aspect of his company’s intellectual property (a trademark, for instance) for a certain amount of time and in accordance with certain conditions, in exchange for a set fee or royalties on sold products, and without any transfer of ownership. It is based on a contractual agreement between the owner, the licensor; and a licensee – normally a manufacturer or retailer. It grants the licensee permission to use the property subject to specific terms and conditions, which may include the purpose of use, a defined territory and a defined time period.

What are the benefits of the Licensing Agreements?

The Licensing Agreements broaden your exposure to new markets without having to invest as much into the operations required to get to a bigger brand recognition. Whether that would be customers of a specific industry or a new territory. Not only does this lead to extra revenues without putting in a massive investment, but it also prevents you from having to take care of the different formalities that might be involved with exporting your products in other countries.

There are many benefits of licensing deals. Allowing another company to use your name or logo is a very efficient way to expand your brand onto other products. Doing so on your own is very costly and requires a lot of expertise. Licensing in this case might just be the more time-efficient solution.

Examples:

Calvin Klein: about 90 percent of the $160 million a year in sales at Calvin Klein Inc. comes from licensing the designer's name to makers of underwear, jeans and perfume.

Walt Disney: Walt Disney Company is the world’s leading licensor with $56.6bn in licensed products.

IBM: Attributes $1 billion a year of its corporate sales to licensing.

What should you keep in mind?

Make sure you have registered you trademarks before allowing anyone to use them.

Make sure your Licensing Agreement is complete and precise. Also the royalties or set fees, the territory, product category, and of course, the intellectual property right you are planning on letting your future licensee use, are all listed in the Agreement. Discuss who will be taking charge of the different aspects involved in making the product and bringing it to the customer.

Choose your partners well

If expanding your brand through licensing is something you are seriously considering, take enough time to discuss your ideas and your vision with your potential licensees. Give your licensee clear instructions regarding the quality of the merchandise you will be working on and plan regular quality control checks to make sure the quality stays constant throughout the duration of your Agreement.

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