4 Essential Elements of a Licensing Agreement

One of the most lucrative types of business relationships today is one between a licensee and a licensor. In this relationship, the licensor has a product of some sort that they have the legal rights to, but doesn’t want to handle the marketing and selling of on its own. The licensee has the time and skills to market a product, but doesn’t have a product of its own. The two parties come together and create a licensing agreement that allows the licensee to brand and market the product, and the licensor will get some type of compensation.

The licensing agreement must contain essential elements to ensure that all of the details of how things will work are covered. When done properly, this type of agreement can help prevent conflict and ensure that a healthy business relationship is able to thrive for years to come. The following are some of the most important elements of any good licensing agreement:

Scope of the Agreement

Detailing the scope of the agreement is important because it will identify all of the key components of what it covers. Some points that are often identified in this element include the following:

  • Exclusivity
  • Territory Rights
  • Guarantees of Sales

Financial Arrangement

Every licensing agreement is going to have to cover the financial arrangement of the deal. This will include things like how much the licensor gets paid for every item sold (or some other type of financial compensation arrangement), whether there is any payment for the right to use the product itself, and much more.

Time Frame of the Deal

Most licensing agreements will be valid only for a certain length of time. The agreement may have an option to renew the contract or have it modified at that time. In addition to setting a potential end date for the agreement, it is also a good idea to identify dates by which the licensee must have the product available to the market. This helps to ensure that the product is actually being sold so the licensor is not stuck in a deal that is not making any money.

Quality of Products

For many product owners, quality is a big concern for their products. When this is the case, it is essential to include specific requirements regarding the quality of how the products are made, the brands they are being sold under, and much more. One of the more popular ways of doing this is to have a clause that requires the licensor to sign off on all quality and brand decisions before they are made.

Getting Legal Help

As with any other type of contract, licensing agreements need to be written in such a way as to avoid ambiguity and confusion. Whether you are the licensee or the licensor, it is important that you have an experienced attorney there to write or review the contract before it is signed. Contact Carla D. Aikens to go over your situation and get the legal help you need today.

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Written by Carla D. Aikens

Carla D. Aikens

After years of working for large law firms on major corporate cases, Carla D. Aikens chose to go out on her own and found her own firm because she is passionate about helping people of whom others have taken advantage.