What Does A Licensing Agreement Do
For a company with a quality product, but without the ability to create it, licensing is a great way to make that product. Essentially, licensing is the best way to get a return on investment and has the best chance of success. A license agreement is a written agreement between two parties in which one owner allows another party to use that property under certain parameters. A license agreement or license agreement typically includes a licensor and a licensee. Licensing can be done by a single company, but if that`s not possible, an alternative is to consider a multi-tiered approach to your license, where multiple components are done by different manufacturers, final assembly is done by another, and possibly distribution by another. This can divide the risk if the size of the project is perceived as too large by a licensee. When a party licenses something, they want to make sure it`s being used in the right way. This section of the Agreement describes how Licensee will ensure that this happens. This may include regular quality assurance checks or give the licensor the right to monitor the sale. Pay attention to the definitions. Make sure that the product or process is described in a complete and clear manner so that there are no misunderstandings about what is allowed. But it`s rarely that simple, because the licensee`s activities are an issue that should be of great interest to any savvy licensor, as a poor or malfunctioning licensee can lead to the uselessness of a product or service that could have developed good cash flows, while other competing products dominate the field.
In addition, most licensees need advice and assistance from the licensor, so inevitably requires more than « cashing the cheques. » While many inventors dream of licensing their product to a multinational that simply pays a lot of money over time, the average license includes two relatively small companies that must work together for the process to succeed. A license agreement is a legally advantageous agreement between two parties, the licensor and the licensee. In a typical license agreement, the licensor grants the licensee the right to manufacture and sell goods, to apply a brand name or trademark, or to use a patented technology of the licensor. In return, the licensee generally submits to a set of conditions relating to the use of the licensor`s property and undertakes to make payments called royalties. Exclusivity and territory. The licensee is granted the exclusive right to manufacture and sell the product in a specific territory. Licensor agrees not to allow anyone to sell the Product in this territory. This part of the agreement is usually associated with a term.
It is difficult to determine an acceptable licensing rate for a product because there is no percentage of quick fix that can be applied as a general measure. Although rates between 3% and 8% of net sales are common, each licence agreement is unique and the only consensus that matters in terms of royalties is that which occurs between the licensor and the licensee as a result of negotiations. License agreements ensure that you have legal permission to use someone else`s property or the company. For example, if you were to use an artist`s song in an advertisement, you`ll need to sign a license agreement to do so legally. If you use the song without permission, you may violate copyright laws and risk being sued or fined. Intellectual property licensors use three main types of licensing agreements. Some of these laws automatically cover the owner of the intellectual property. In other cases, such as.B. Patents, the process of obtaining protection is complex and requires specific measures on the part of the inventor. A person needs to know their intellectual property rights before creating license agreements.