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A licensing agreement is a written contract between two parties, a licensor and a licensee, that gives permission, under certain conditions, to use another party’s property, like a brand, patent, or trademark.
The licensor benefits from the relationship, too, in the form of royalties; the revenue generated from a licensing agreement.
Licensing agreements can take many forms, including:
Since licensing agreements protect property, scrutiny of any agreement by a professional lawyer is worthwhile. Here are 8 important things to look for in a licensing agreement.
The most important thing to establish is your ownership over anything you are trying to secure a licensing agreement for. For example, in the case of a trademark, you want to ensure it’s already registered in your name.
In that same vein, you must also ensure you are prepared to defend your ownership against claims or disputes. Again, an excellent way to stay prepared is to keep any documentation or evidence of ownership accessible but protected.
Here is an article with examples of licensing agreements.
Performance requirements are sets of stipulations that ensure the original entity’s name is not tarnished and that the brand's standards are kept intact.
For Holiday Inn, their standard is all about keeping their properties well-maintained. They make regular inspections at licensee hotels to ensure hotel owners keep up with the brand standard. If the licensee hotels are not meeting an acceptable standard, they could lose their licensing agreement.
Here is an article about three common types of licensing agreements.
An exclusivity clause or an exclusivity agreement is added to license agreements, in part, to protect their market.
In the case of the Holiday Inn, putting another hotel on the next block of an existing hotel would be counterintuitive. One hotel would just suck business from the other. Under exclusive exclusivity clauses, territory restrictions can protect the market territories around their licensee businesses.
Here is an article about the risks of being a licensee.
Meet some lawyers on our platformIf an affiliate or sub-distributor would be considered in the arrangement, it must be outlined in the license agreement. For example, a subsidiary relationship would allow the licensee to permit a third party to use, or sub-distribute, their property.
For their protection, savvy licensors should ensure expectations of this nature are detailed in the licensing agreement before signing.
Here is an article about the 25% rule for royalties.
A termination clause or a contract termination agreement is included in nearly every licensing agreement, and for a good reason. Licensors need to have the flexibility to cut ties easily if the licensee isn’t holding up their end.
On the other end of the spectrum, if you are looking to be a licensee, consider the implications if you find out the product you agree to sell isn’t a good product after all. It is important to outline agreed-upon exit plans for either party in this section.
Here is an article about what a termination clause should include.
The product liability portion of the license agreement covers which party is penalized if the “use, consumption, storage or transportation of the product cause[s] harm.” If you are looking into a licensee opportunity, make sure the product is something you want to put your name on.
Here is an article about whether licensing an invention is a good idea.
The length of the relationship is another part of a licensing agreement you should be sure to review. It is usually measured in years against a baseline or effective date. A two- to three-year contract is common.
Here is an article where you can find out if you are using the right kind of licensing agreement.
The section of the licensing agreement covering payments and royalties outlines how and when a licensee will pay the licensor to use their property. It is important to flesh this part out at the beginning, as this will set the tone for the entire agreement.
Most licensing agreements define royalties as a percent of sales or a flat payment per unit.
With licensing agreements, the devil is truly in the details, and you want to ensure those details are handled by a seasoned lawyer.
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Ralph graduated from University of Florida with his JD as well as an LLM in Comparative Law. He has a Master's in Law from Warsaw University , Poland (summa cum laude) and holds a diploma in English and European Law from Cambridge Board of Continuous Education. Ralph concentrates on business entity formation, both for profit and non profit and was trained in legal drafting. In his practice he primarily assists small to medium sized startups and writes tailor made contracts as he runs one of Florida disability non profits at the same time. T l Licensed. in Florida Massachusetts and Washington DC this attorney speaks Polish.
A seasoned senior executive with experience leading the legal and compliance functions of healthcare entities through high-growth periods. I have experience managing voluminous litigation caseloads, while also handling all pre-litigation investigations for employment, healthcare regulatory, and compliance matters. Similarly, I have led multiple M&A teams through purchase and sale processes, including diligence and contract negotiations. Finally, I have extensive contract review experience in all matters, including debt and equity financing, healthcare payor contracting, vendor and employment agreements, as well as service and procurement agreements.
I am a software developer turned lawyer with 7+ years of experience drafting, reviewing, and negotiating SaaS agreements, as well as other technology agreements. I am a partner at Freeman Lovell PLLC, where I lead commercial contracts practice group. I work with startups, growing companies, and the Fortune 500 to make sure your legal go-to-market strategy works for you.
Elbert Thomas is the founder of the Thomas Law Group, LLC. Elbert is proficient in contract creation, drafting, reviewing, and negotiating various business contracts and demand letters in industries such as construction, personal, professional services, non-profits, and real estate. Elbert typically represents small and large companies in drafting and negotiating countless agreements such as purchase sale agreements, interconnection agreements, lease agreements, demand letters, cease & desist letters, transfer of deeds in real property, and merger/acquisition agreements. In addition, Elbert is also experienced in start-ups, small business formation, drafting operating agreements, and estate planning.
Pico & Kooker provides hands on legal advice in structuring, drafting, negotiating, interpreting, managing and enforcing complex high value commercial transactions. Adept at navigating complex environments, Jonathan has extensive expertise advising clients on a wide range of long- and medium-term cross border and financial engagements, including public tender participation, PPPs, export sales agreements as well as policy and regulatory formulation. Jonathan and his co-founder, Eva Pico have represented and acted on behalf of lenders, global corporations and other market participants across a range of industries including financial services, infrastructure and transportation. As outside counsel, Pico & Kooker, has developed a strong rapport and working relationship with their clients and appropriately work with their in-house teams to increase consistency, processes and procedures. The company employs a unique approach as practical, business minded outside legal counsel who believe in proactively partnering with their clients to achieve desired results while managing and engaging key stakeholders. They listen to their clients to develop customized solutions that best meet their needs while aligning with their objectives, vision and values. Some representative transactions include advising the World Bank on project finance and portfolio options to address the costs and risks associated with integrating renewable power sources. Also advising them as legal counsel, Jonathan developed policies, regulation and models for emerging market governments entering into public-private partnerships. In addition to his work with the World Bank, Jonathan has worked with some of the world’s largest consulting firms, financial institutions and governmental organizations, including the United Nations, the governments of the US, UK and select African countries. Through out his career, he has worked with large, multinational corporations both by consulting in-house and acting as outside counsel on large cross-border transactions. He graduated from Georgetown University’s law school and was admitted practice as a lawyer in New York, England and Wales and, as a foreign lawyer, in Germany. He has written several articles for trade journals and has been cited by several business publications in worldwide. Jonathan is a native English speaker and has high proficiency in German and a functional understanding of Spanish.
