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Three important parts of a licensing agreement

A licensing agreement is a contract that lets one entity use trademarked branding or sell products that are branded or owned by the other entity. Each agreement is unique to the situation, and they can be quite complex. Therefore, it's a good idea to consult with an experienced business law attorney before signing any such agreement. Here's a look at three important parts of any licensing agreement. 

One item that should be obvious to include is a timeline. How long will the agreement stand? Specifically, how long is one company allowed to sell or use the other company's branding? Most licensing agreements are not forever because companies want to leave room for renegotiation in the future. Companies that own the brand might also have future plans outside the agreement and they want to ensure they have full rights back.  

Another item to cover is financials. This includes things such as how much is one company going to pay to use the other company's brand. Agreements might also cover penalties and fines if certain elements of the contract are breached.  

Finally, licensing agreements should cover quality elements. If one company is using the other's branding, then they are representing that brand. The original company won't want its brand diluted with poor quality product, customer service or marketing. They might make specific requirements in the agreement to ensure their brand is upheld in the market.  

These are just some things that might be included in a licensing agreement. To ensure that your agreement is comprehensive and protects you as fully as possible, consider working with a lawyer to draft and negotiate it. 

Source: Inc., "Licensing Agreements: The Basics," accessed Dec. 16, 2016  

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