What is a Licensing Agreement?
In lay and very simple terms, it is the permission that one person (licensor) gives to another (the licensee) to use property owned by licensor. Several areas of the law come into play mostly contracts and intellectual property law.
Benefits: Licensor gets royalties/more revenue streams, more brand recognition, entrance into new markets (Africa and Asia serve as illustration of this point), minimal investment in product development and manufacturing, among many benefits. Disadvantages: Licensor might lose some quality control over its product and brand.
Licensing really saw a boom in 1980s-90s. In fashion, it is a multi-billion dollar global industry with names like Christian Dior who began in 1949, Bill Blass, Anne Klein, Calvin Klein, among others, to thank for making it so commonplace.
How it Really Works
First, a licensing agreement is not some casual phone call or email. You should get an attorney involved, have your ducks lined in a row and know exactly what you are trying to accomplish. An agreement should, needless to say, also be in place.
Second, there are some keyterms that must necessarily be a part of the licensing agreement.These key terms and all terms in the agreement govern your relationship throughout the duration of the license.
Some key terms in the agreement include:
- Exclusivity (Usually a non-exclusive license is granted)
When all else fails, i.e. there is a breakdown in the relationship; litigation is available to sort out what the parties truly meant. Obviously, litigation is very expensive. So, while you will help make money for attorneys (we are so not complaining) it makes sense, at the onset, to get it right so you avoid the personal headaches and high blood pressure that comes with not getting it right, at the onset.