License agreements describe the terms under which one party may use another party`s property. While the properties in question may include a variety of elements, including real estate and personal effects, licensing agreements are most often used for intellectual property such as patents and trademarks, as well as copyrights for written materials and visual arts. 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 the popular similarities of movie characters. Examples of licensing can be found in many different industries. An example of a license agreement is an agreement between software copyright holders and a company that allows them to use the computer software for their day-to-day business operations. The bargaining power of both parties to a licensing agreement often depends on the type of 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.
Licensing agreements are often used for the commercialization of technologies. Unlike the sale of an asset, the licensor remains the final owner of the asset or methodology; limited rights to use what Licensor owns are transferred, not ownership. The alternative to a license is the actual sale of the asset to the buyer, but most licensors still want to be owners so that they can use the asset in the future or in other territories or applications. It is essential that the licensee acknowledges that, unlike full ownership, the license is only a set of rights that the licensee receives with ownership of all remaining rights of the licensor. But it`s rarely that simple, because the licensee`s activities are an issue that should be of great interest to any smart licensor, as a poor or malfunctioning licensee can lead to the uselessness of a product or service that could have generated good cash flow, while other competing products dominate the field. In addition, most licensees need advice and support from the licensor, so it is inevitably not just “cashing the cheques”. While many inventors dream of licensing their product to a multinational that simply pays a lot of money over time, the average license includes two relatively small companies that must work together to ensure the success of the process. Usually, the purpose of a license is that the licensor is passive and receives only royalties, while the licensee operates the business or development and can operate it freely 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.
Licensing a product or service can be a great way to generate good cash flow if the document is properly prepared and clearly understands the objectives and obligations of the parties. In most cases, the scope of a license is limited, leaving the licensor free to develop specific markets or work with more than one licensee. It is important not only to keep an eye on the right legal advice, but also to get good tax advice and local knowledge before starting the relationship. If done right, it can be a way for an inventor or developer of a product or service to minimize involvement in marketing work and delivery of the service or product while generating good revenue. The license is usually reduced to a written agreement that specifies the rights, obligations, and payments that are part of the license. A license may grant Licensee all rights to exploit the Asset (“Exclusive License”) or only some of the rights or rights of use in connection with other persons (“Non-Exclusive License” or “Limited”). The license normally grants the licensee all the exploitation rights it deems appropriate, but may have certain performance criteria or the license may expire or become non-exclusive. In today`s fast-paced and highly competitive high-tech environment, an efficiently managed patent licensing program is a must. The second edition of Drafting Technology Patent License Agreements shows you how to achieve this. This valuable resource covers all the legal and business issues you will encounter when drafting and negotiating patent license agreements. It walks you step by step through the unique aspects of implementing a patent licensing program for computers, electronics, telecommunications, and other industries, and clarifies the issues associated with the application and litigation of these patents.