What to Look for in a License Agreement

Royalty (closing) Revenue from the sale or use of a licensed product or process. For example, a licensing agreement allows a company to use an existing product or trademark at its own discretion – without interference from the parent company (unless the company violates 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. In some cases, one or all parties will not want their name to be used in connection with licensed products that are advertised or sold, as this may indicate that the licensing institution recommends those products. If this is the case, this should be stated in the agreement. Obligation of non-competition. Licensor agrees not to allow anyone to compete with the License in the territory and period specified in the Agreement. However, if no incentive is provided, the licensor may in fact penalize the licensee for doing business with the licensee. Similarly, if a licensor enters into an exclusivity agreement just to discover a more powerful company in the same geographic region, it has anchored itself to the weakest link.

Patent licenses include the right to manufacture, sell, use, distribute and export the patented product. This section deals with any improvements made and/or patented during the term of the licence by the licensor or licensee (paid by whom and by whom) and the obligations contained in the contract, whether or not future technologies should be included in this licence or whether future technologies are subject to the licensor`s rights. This section restricts when and where the Licensor may sell its property. It ensures that the licensee may be the only entity that sells that product or service in a particular territory. For example, a Burger King franchisee would like to be the only Burger King in a particular area. Without this deal, the licensor could allow another Burger King franchise to appear next door. The territory granted to the licensee under the licence must be accurately identified. In most cases, licensors are willing to assume liability, provided that licensee does not modify the final product or service beyond specifications.

However, most do not assume any responsibility if the product is manufactured or purchased by a licensee, who then simply affixes the licensor`s logo, etc. All other appropriate terms should be listed and defined. Clear definitions give a very clear license. Care should be taken to write definitions that are generally self-sufficient and are not constructed in a circular way. A simple contract does not need to have a section dedicated to definitions, as definitions can be presented when special terms are first encountered. A complex document should present all the definitions in a single section in order to facilitate the drafting and subsequent interpretation of the contract. The general conditions used throughout the contract must be included in this section, as well as frequently used technical terms. An alphabetical or hierarchical order is recommended, the latter being used when a number of terms are closely related and when they are close to each other, the reader can more easily navigate through the agreement. Trust to maintain for the specified time ____; Without limitation with respect to time______; Living ofagreement______ That`s why “it`s out of my control” why I don`t run under the license. A hurricane has just wiped out your seed plants for the year, and you have no seeds to supply or sell. Your chemical plant has just gone up in flames. Things happen, and this reality of life must be taken into account in the contract.

The key is to determine what is required after the occurrence of force majeure to deliver the licensed product(s) to the licensee as soon as possible. Technically a French term, it literally means “greater strength”. Copyright licenses include the right to reproduce and sell the copyrighted asset, including derivative works (works based on the original work). The right to perform the work publicly may be licensed. For example, a license agreement is a two-party agreement in which the owner of an intellectual property (IP) (the licensor) grants another party (the licensee) certain rights to use an aspect of that intellectual property. The licensee generally pays certain fees to the licensor in exchange for these rights and must agree to a number of terms and conditions for the use of the asset. Licensee refers to the license agreement as an inbound license, while licensor refers to agreements as an outbound license. Start-ups can license intellectual property to other companies for many reasons, such as .B. to obtain a license to use or integrate certain software or technology into the development of their products, to obtain a license to use or display a licensor`s trademarks in connection with a marketing relationship, or to resolve an ongoing patent dispute by providing the applicant with a license to use the disputed intellectual property.

Property granted. This article discusses five factors that business owners should consider when entering into an inbound license agreement. The list simply tries to highlight some of the most important factors and is not an exhaustive list of problems that will arise. Trademark licenses include the right to use the trademark on certain items and in certain ways. Payments. As mentioned above, the licensee usually pays royalties to the licensor. There may be an initial advance on royalties, and then the current royalties are based on sales. Royalties can be paid based on a percentage of sales or a lump sum. Think about which method works best for both parties (and don`t forget about inflation and exchange rates).

Usually, the purpose of a license is that the licensor is passive and receives only royalties, while the licensee participates in the business or development and is free to operate as long as the royalties are paid and other criteria are met. Failure by licensee to comply with the license agreement usually results in termination of the license and payment of damages to the licensor. Licensee agrees: produce______ or sell______ units_____produce______ specified or sell______ specified products ____invest amount____________________satisfy trade______not requirements, a reasonable request for sublicense______ h) copies of the sublicense to be made available to Licensor________; The consideration sections of the checklist are relatively time-consuming and can be shortened if fairness is not part of the license payment. Royalties, milestone payments, currency type, exchange rate determination, and share issues are listed here, as well as the issuance of minimum annual payments, which is especially important in the case of an exclusive license. .