To protect yourself and your business, it`s important to be thorough when creating a license agreement. Both the licensee and the licensor must have a clear understanding of what they are accepting. Consider the following tips before you begin: License agreements describe the terms under which one party may use another party`s property. While the properties in question may include a variety of elements, including real estate and personal effects, licensing agreements are most often used for intellectual property such as patents and trademarks, as well as copyrights for written materials and visual arts. 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 the popular similarities of movie characters. The benefits of licensing can be viewed from two angles: the licensor and the licensee. Non-licensing steps include creating and establishing your brand name, establishing licensing policies, licensing trusted companies, limiting license renewals, implementing licensing training to ensure the manufacture or production of quality products, and monitoring brand reputation with respect to the use of licensed products. These are important additional steps taken when renting your brand name to a licensee. In addition to detailing all the parties involved, licensing agreements detail how parties are allowed to use real estate, including the following parameters: As with any other marketing or business development strategy, licensing comes with many risks. While these risks are preventable, they are inevitable and can be detrimental to both parties. Licensing or licensing agreements expose the licensor, innovator or seller to the risk of losing all or part of the intellectual property rights.
The loss of intellectual property rights is the greatest risk associated with this process. Due to the nature of licensing agreements, licensor relies on the licensee`s skills and resources to generate revenue. However, there may be a loss or no turnover at all if the licensee is inefficient or incompetent. This is even more devastating in the case of an exclusive license. Recurring payments of license agreements are of great benefit to the licensor and also to the licensee. Pharmaceutical companies can use licensing to access new or foreign markets and expand their portfolio. Licensees whose market positions are threatened by competing companies can also benefit by launching new products on the market. The licensor and licensee also have a reduced risk of business development. External licensing focuses more on opening the delivery pipeline to help you get your medicine out of the door. Licensing involves finding one or more partnerships that will help you identify your target market and put your product in good hands. This process may include working with marketing firms or law firms. The financial relationship with this type of license is very different from the one described in the section on licenses above.
For example, a licensing agreement allows a company to use an existing product or brand as it sees fit – without interference from the parent company (as long as the company does not violate certain established criteria). On the other hand, franchises often involve more restrictions (and sometimes direct control) of the licensee`s business practices by the parent company. This process is primarily about finding partnerships with a licensed company or company to support the manufacturing, development, production, sales or marketing of products. Licensor and Licensee have a mutual agreement to develop or commercialize the drug, patent, trademark or technology in exchange for a one-time payment, upfront payment, milestone payment or royalty payment at the end of a particular stage of development or commercialization. These agreements are based on consideration. Most pharmaceutical companies tend to opt for payment plans that include a recurring payment of fees. brandongaille.com/14-licensing-advantages-and-disadvantages/ Like franchise agreements, most license agreements contain performance or due diligence clauses. These clauses make it possible to dissolve the contract or impose penalties if the licensee does not meet certain requirements.
For example, if a company does not meet certain sales targets or does not properly market a product, the parent company can terminate the license. www.intracen.org/What-are-the-advantages-and-disadvantages-of-licensing2/ To see how this might play out, consider the case of software license agreements. If your company enters into a license agreement to use or sell another company`s product, what happens if the software does not meet your needs? Are you facing high fees to terminate your contract, or does your contract give you a gracious way to end the relationship? Patents cover science and innovation. Patent licensing agreements are the documents by which a patent holder allows someone else to use their patent. Trade secret licensing agreements are often associated with non-disclosure agreements (or NDAs). Non-disclosure agreements stipulate that the party receiving certain confidential information may not disclose it to third parties. Termination clauses are incorporated into almost all license agreements. In general, licensors want to be able to sever the relationship with a licensee in the blink of an eye, while requiring licensees to jump through hoops if they want to break the relationship. This protects the parent company and brand identity while minimizing overall liability. Exclusive licences are those which create a clear relationship between the licensor and the licensee. In these types of license agreements, the licensor agrees that the licensee is the only one who can use the intellectual property.
These usually cost more for the licensee. Under a non-exclusive license, the licensor may license the licensed intellectual property to more than one licensee. These types of license agreements usually cost the licensee less. In fact, even seemingly clear termination clauses may not work as desired. Take the case of TransCare – a medical transportation service that has a licensing agreement with software company Digitech to replace its shipping program. Although Digitech`s proposed sale includes a mention of a “90-day satisfaction guarantee”, this exact wording was not included in the group`s licensing agreement. When TransCare attempted to exercise this termination clause in response to defective and defective software, Digitech dismissed the claim – the U.S. Seventh District Court of Appeals upheld Digitech`s argument. Licensees and licensors like to be thorough in their agreements to ensure that nothing is overlooked. Both parties need to know what rights they have in relation to this relationship.
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