Licensing agreements can be complex, and they can ultimately impact whether a business or product line does well in the market. At the very heart of these legal terms, though, the agreements are contracts, and businesses should treat them as such. Here are three tips for ensuring you're protected when dealing with licensing agreements.
Everything needs to be in writing in a formal agreement. Most business owners and managers today know that contracts are necessary and that we, as a society, don't function on handshake agreements anymore. However, many people make the mistake of agreeing verbally to smaller areas as they negotiate a contract and then failing to ensure those details are formally recorded in the document. At the end of the day, if it isn't spelled out in the written agreement, you don't have a solid record of the arrangement.
Don't gloss over language that you don't understand or aren't sure about. Whether you're working with legal professionals to prep your own version of contracts or you're reviewing a documents offered by another company, never ignore phrases and language you don't fully understand. Always ask for clarification on exactly what something means and don't sign paperwork until you're satisfied you understand the agreement. The difference between just a couple of words can be quite large in a legal contract.
Finally, include an exit strategy. This is true of any contract you enter into as a business owner or manager. You never want to lock yourself into an agreement perpetually -- especially when it comes to licensing matters. Make sure to include clauses about buying out of the contract, how to terminate the contract should a breach occur and how disputes about the contract will be handled.
These are just some tips for dealing with licensing agreements. If you're facing such negotiations, it's a good idea to involve a business law pro who can help you ensure all your assets and interests are sheltered.
Source: FindLaw, "How to Write a Business Contract," accessed Feb. 24, 2017