The benefits of licensing can be viewed from two angles: licensees and licensees. Licensing agreements are often used for the commercialization of technologies. For a company that has an excellent product but does not have the capacity to manufacture it, licensing is a great way to market that product. Entrepreneur says that, among the possible opportunities to market a product, licensing « offers the greatest potential return on investment and has the greatest chance of success. » The granting of subsidiary licences. The licensee may be granted the right to authorize someone to manufacture or sell their products. This depends on the specific terms of the license agreement. Partial agreements. In the licensing agreement, as with other types of contracts, there may be sub-agreements. For example, the licensee may require a confidentiality agreement to prevent the licensee from disclosing proprietary product features or processes to others. The taker may require the donor to sign a non-compete agreement to prevent the donor from breaking the agreement by allowing another person to sell the product in the exclusive territory of the taker. Whether you are licensed to manufacture a product or the brand holder who licenses your product, the definitions, requirements and conditions set out in the licensing agreement are essential. Since many of us have no idea how to find a trademark license professional, we cannot pass the conditions on to our lawyers. The truth is that lawyers are qualified to address the legal language, such as guarantees, compensation and violation, but in most cases are not sufficiently familiar with the terms of the licensing agreement, including testing protocols, authorized channels, authorizations and quality controls to treat them properly on our behalf.
If you or someone on your team has no experience negotiating licensing contracts, you may find yourself in one of the three most monstrous pitfalls in standard licensing agreements. Warning: one of the most important elements of a licensing agreement is the financial agreement. Payments made by the licensee to the licensee are usually made in the form of guaranteed minimum payments and royalties for sales. Royalties are generally between 6 and 10 per cent, depending on the ownership and the degree of experience and sophistication of the licensee. Not all licensees need guarantees, although some experts recommend that licensees receive as much compensation in advance as possible. In some cases, licensees use warranties as the basis for renewing a licence agreement. If the taker completes the minimum sales figures, the contract is renewed; Otherwise, the licensee has the option of terminating this relationship. Licensing agreements guarantee that you have legal permission to use the assets of another person or company.
For example, if you used an artist`s song in an advertisement, you would have to sign a licensing agreement to do so legally. If you use the song without permission, you may violate copyright laws and risk being sued or fined. Check the rules of the state. Depending on the type of product sold and to whom it is sold, there may be restrictions for the licensee.