Why Would a Company Use a Licensing Agreement

In the case of P&G`s Mr. Clean brand, P&G found that consumers expected them to sell Mr. Clean brand cleaning accessories. In this case, P&G decided to enter the market by licensing the category to Magla, a company that already had expertise and presence in this category. Your submission should be sent to the same sources listed earlier in this document (see previous section Research Sources), and you would like to request the names and addresses of likely licensees. The expansion of the iPod brand through licensing has allowed many companies to manufacture all kinds of quality products to make the iPod more user-friendly and improve the listening experience. Examples include the Bose audio system with iPod docking station, products that allow an iPod to be heard through a vehicle`s built-in stereo system, and iPod holding devices that allow users to “take their music with them” while they are running. All these accessories are sold by the licensees. As a licensor, you are required to provide the legal agreement that ensures that both parties are fully aware of their respective rights and obligations, beyond the mere setting of royalties. Good legal advice is usually needed to negotiate things like these: The bargaining power of both parties involved in a licensing agreement often depends on the nature of the product. For example, a film studio that licenses the likeness of a popular superhero to an action figure creator could have significant bargaining power in this negotiation, as the manufacturer is likely to benefit enormously from such an agreement. The film studio therefore has the leverage to take its business elsewhere if the manufacturer is cold on its feet. A license agreement may grant the buyer exclusive or non-exclusive rights to use the product.

Often, companies only grant non-exclusive rights because they offer the best protection for the product. Tailor-made products are often an exception to the rule. There may also be rules that determine which uses of products are exclusive or under what circumstances non-exclusive rights apply. 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 Licensor the right to monitor sales. The benefits of licensing can be viewed from two angles: the licensor and the licensee. The granting of a subsidiary licence could allow the licensee to authorize another undertaking to use the authorised work. For example, if you are a movie producer and you license a song, you may still need to get permission to allow another entity to use the section of your movie where the song is played. A license agreement is a written agreement that gives you permission to use another party`s property under certain conditions.

The two parties to this Agreement are the Licensor (the licensor) and a licensee (the licensor). Most licensing agreements also address the issue of quality. For example, Licensor may include terms in the Agreement that require Licensee to provide prototypes of the Product, packaging models, and even occasional samples throughout the term of the Agreement. Of course, the best form of quality control is usually obtained before the fact – by carefully checking the reputation of the licensee. Another common provision on quality in licensing agreements concerns the procedure for disposing of unsold goods. If the items that remain in stock are sold as cheap imitations, it can damage the licensor`s reputation in the market. Non-Disclosure Agreement. Both parties undertake not to divulge trade secrets. Another common element of licensing agreements is which party retains control over copyrights, patents or trademarks. Many treaties also include a provision on territorial rights or who manages distribution in different parts of the country or world. In addition to the various clauses inserted in the agreements to protect the licensor, some licensees may add their own requirements.

For example, they may require a guarantee that the licensor owns the rights to the property, or they may include a clause prohibiting the licensor from competing directly with the property granted in certain markets. 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. Licensing can be done by a single company, but if that`s not possible, an alternative is to consider a multi-pronged approach to your license, where multiple components are done by different manufacturers, final assembly by another, and possibly distribution by another. This can divide the risk if the scope of the project is perceived as too large by a licensee. Each license agreement is unique and these agreements vary depending on the type (copyright, trademark, patent, etc.). In general, you will find these sections in most license agreements: Do your due diligence before the contract. Both parties should carefully check the other party. Review business loans and management resumes. Ask for financial statements. Visit the other company`s offices and production facilities.

Try everything. When drafting a license agreement, there are a few important issues to discuss. First, licensing agreements usually include a section that covers geographic location and exclusivity. Licensor agrees to grant Licensee the exclusive right to use the Property in a particular location. Typically, exclusive rights expire after a specified period of time. Among the many types of business relationships encountered in the modern world of transactions is the concept of a license agreement, where one party grants another the right to use a right, trade name, method or product, or other asset for mutual purposes in a business context. The natural or legal person granting the right is referred to as the “Licensor”. The natural or legal person who receives the right is referred to as the “Licensee”. Licensing agreements are important tools for companies that hold the rights to a valuable product, but are not able to manufacture it themselves. The terms of the license agreement determine what the user can do with the product.

The license includes prohibited uses of the product, any modification rights and any termination conditions. Also mentioned are the rights of transmission and sub-license of the product. In addition, a user is often required to accept Licensor`s warranty terms, support services and limitations of liability. Sometimes a license has length restrictions or a renewal protocol. A license agreement is a commercial agreement between two parties. The licensor (the seller of the license) owns the assets to be licensed and the licensee (the buyer) pays for the right to use the license. Licensee shall pay royalties to the Owner in exchange for the right to sell the Product or use the Technology. You will need exclusive rights to your property before licensing it.

According to Lawyers.com, the best way to protect your property is to register all copyrights, patents and trademarks. This protects all your original works, inventions and branded items. In addition, you can protect your property by enforcing trade secret laws that protect trade secrets internally, as registering your property with the government may sometimes require public disclosure. For a company that has a great product but has no way to make it, licensing is a great way to bring that product to market. The entrepreneur says that among the potential ways to commercialize a product, licensing “offers the greatest potential return on investment and has the greatest chance of success.” There are many inventory licensing methods to get a license for a product. While there is no need to create a new agreement from scratch, licensors must address all company-specific issues. It is also important to retain the ultimate property rights, Lawyers.com. In addition, a license agreement must be specific enough to protect the company`s ownership, but broad enough for customers to agree to the terms. Licensing allows companies whose brands have a strong preference to unleash the latent value of a brand and meet pent-up demand. After Apple launched the iPod a few years ago, there was an immediate need for accessories. Apple could have chosen to manufacture and distribute them itself, but decided that accessories were not the heart of the company and therefore decided to meet this need through licensing.

Licensing of subsidiaries. The licensee may or may not be granted the right to allow another person to manufacture or sell his products. This depends on the specific terms of the license agreement. They invented something, it received positive reviews and is patent pending. Or maybe your company doesn`t have the capital or expertise to manufacture its product and market it in a global market. .