How License Agreement Works

In a typical licensing agreement, the licensee undertakes to make intellectual property rights such as technology, brand name or licensee know-how available to the licensee. In exchange for the intellectual property of the licensee, the purchaser usually plays the donor a pre-feeding and/or a licence fee. A licence fee is an ongoing fee paid for the licensee`s right to use intellectual property. A licensing agreement is a legal contract between two parties, the licensee and the licensee. In a typical licensing agreement, the donor grants the purchaser the right to manufacture and sell products, apply a brand name or trademark, or use the licensee`s patented technology. In return, the taker generally submits to a number of conditions relating to the use of the licensee`s property and undertakes to publicize the payments in the form of royalties. Licensing agreements cover a large number of known situations. For example, a retailer could enter into an agreement with a professional sports team for the development, manufacture and sale of goods bearing the sports team logo. Or a small manufacturer could concede a production technology owning a larger company to gain a competitive advantage rather than investing the time and money to develop its own technology.

Or a greeting card company can agree with a movie distributor to create a series of greeting cards that carry the image of a popular animated character. In May 2018, Nestlé and Starbucks entered into a $7.15 billion coffee licensing agreement. Nestlé (the licensee) has agreed to pay $7.15 billion in cash to Starbucks (the licensee) for exclusive rights to sell Starbucks products (single serving coffee, teas, beans, etc.) through Nestlé`s worldwide distribution network. In addition, Starbucks receives royalties from coffees and packaged teas sold by Nestlé. Describe how royalties work. What`s paid when? Does the property remain the original owner for the duration of the licence? What will happen if the minimum turnover is not met? Is there an advance on royalties? Start and end of the agreement. Say when the agreement will be reached and when it will end. Describe the possibility of a renegotiation and continuation of the agreement at the end of the agreement. Please consider the circumstances under which the agreement may expire before the expiry of the term. What happens to the possession of the product at the end (usually it is converted into owner)? A licensing agreement is a business contract shared by two parties.

A licensee who owns the product or brand and the licensee who purchases the license with the intention of working with the existing product or brand. Simply put, it is a contract that allows one company to use the intellectual property of another company. License – the agreement itself, including terms and conditions (time limits, territories) and the distinction of exclusivity. It is also important to break down all the methods in which the taker can use, sell, produce, sublicensing, divide or export the product. The term “licence” has two meanings: one in general terms (for example. B driver`s license) and the other in the economy and commerce. A licence in the broadest sense is “the authorization of an authority to own or use something.” Most licensing agreements also deal with the issue of quality. For example, the licensee may enter into the contract conditions that require the purchaser to provide prototypes of the product, mockups of the packaging and even occasional samples for the duration of the contract. Of course, the best form of quality control is usually achieved before the fact – by carefully checking the reputation of the licensee.