What Is the Function of a Licensing Agreement

License agreements ensure that you have legal permission to use another person`s or company`s property. 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. To use the property of another company, you usually have to pay some kind of royalty. You might be able to pay this in an upfront amount or create a payment plan based on the property`s sales. For example, a license agreement may stipulate that the licensee must pay 1% of all sales to the licensor. If a licensee earns $10 per item, they owe the licensor 10 cents for each item sold. There are many uses for license agreements. A common one is for the commercialization of technologies, for example, if your small business wanted to use software in your business operations. The Software Company may require you to sign a license agreement in order to use its Software. Another example is when franchises have licensing agreements with a restaurant`s head office. Licensing allows the franchisee to use the company`s branding and marketing materials.

A well-written license agreement is important for licensees and licensors. If your business needs help at any point in the process, our team of contract lawyers can help. Whether it`s writing the entire agreement or reading your own template, we have the expertise to make sure it`s done right. The steps to create a license agreement are as follows: Download a license agreement template. Choose your role as a licensor or licensee. Define the license(s) in the agreement. Decide whether the license is exclusive or not. Clarify the issue of fees and payment plan. Add a renewal date and rules. What is a license agreement? Basically, a license agreement is a contract that allows one person to use another person`s property for a certain price.3 min read One of the most important elements of a license agreement includes the financial agreement. Payments made by Licensee to Licensor are generally made in the form of guaranteed minimum payments and royalties on sales. Patents are about science and innovation.

Patent licensing agreements are the documents by which a patent holder allows someone else to use their patent. An example of a restaurant license agreement would be if a McDonald`s franchisee has a licensing agreement with McDonald`s Corporation that allows them to use the company`s branding and marketing materials. And toy manufacturers regularly sign licensing agreements with movie studios, giving them legal authority to produce figurines based on popular images of movie characters. A license agreement allows a party (the licensee) to use the owner`s property (the licensor) and/or generate revenue from it. Licensing agreements generate revenue, called royalties, that are earned by one company because they allow another company to use its copyrighted or patented material. Here are 10 points that should be addressed in every license agreement: Exclusive or non-exclusive. In an exclusive license, the owner of the intellectual property grants the licensed work to a single person for that particular use/territory. Area. Use. Allotment.

Derivative works. Confidentiality. Window. Termination. But it`s rarely that simple, because the licensee`s activities are an issue that should be of great interest to any smart licensor, as a poor or malfunctioning licensee can lead to the uselessness of a product or service that could have generated good cash flow, while other competing products dominate the field. In addition, most licensees need advice and assistance from the licensor, so there is inevitably more to do than cash 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 involves two relatively small companies that must work together to ensure the success of the process. Most license agreements define the parties involved in the agreement and the scope of what is licensed. Describing how the licensee can use the property is the primary purpose of licence transactions. In general, the licensee`s ability to use the property covered by the agreement has a temporal or geographical limit.

Christian, Glynna K. „Joint Ventures: Understanding Licensing Issues.“ The License Journal. October 2005. License agreements can be broken down by type of intellectual property they license. They can be divided into exclusivity and duration. Depending on the authorized ownership, royalties can be either a lump sum or a percentage of what the licensee earns using the product. When licensing a product, the licensor almost always requires monitoring of the product to ensure that it is being used correctly. For example, Licensor may require product quality control before Licensee makes sales.

In addition to an initial review, many licensors require regular quality monitoring throughout the term of the license agreement. In May 2018, Nestlé and Starbucks entered into a $7.15 billion coffee license agreement. Nestlé (licensee) has agreed to pay $7.15 billion in cash to Starbucks (the Licensor) for the exclusive rights to sell Starbucks products (single-serving coffee, tea, bean bags, etc.) worldwide through Nestlé`s global distribution network. .