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.
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.
A licensing agreement isn't free. The company that wants to be allowed to use someone else's trademarked and copyrighted material has to pay for that right, and this is done up front, with royalties, or both.
Licensing agreements can be a huge source of revenue for those who own the rights, as companies will often pay well to be able to put logos and other information on their merchandise and products. For example, apparel companies that make shirts with NFL team logos on them have to license the rights to those logos, as they carry an intrinsic value -- people will buy the clothing specifically because of the logos.