Licensing is the practice of leasing a legally protected property (such as a trademarked or copyrighted name, logo, likeness, character, phrase or design) to another party in conjunction with a product, service or promotion.
It is based on a contractual agreement between the owner of the property (or its agent) known as the licensor; and a licensee – normally a manufacturer or retailer. It grants the licensee permission to use the property subject to specific terms and conditions, which may include the purpose of use, a defined territory and a defined time period. In exchange for this usage, the licensor receives financial remuneration - normally in the form of a guaranteed fee and/or royalty on a percentage of sales.
Most agreements are set out in a licensing agreement. We have licensing agreement frameworks for sale however we do recommend using a lawyer to execute all legal documents. However being able to present your lawyers with a basic framework of a licensing agreement with your key commercial terms could possibly help to reduce consultation time at the initial stages of the legal process.
click here: Download a Contract Framework
The Benefit of Licensing for Licensors
The key benefit for a licensor is the ability to exploit and enhance its brand or property. Licensing can do this by:
- increasing its brand presence at retail or distribution outlet
- creating further brand awareness to support its core products or services
- supporting and enhancing its core values by associations with the licensed products/service or category (e.g. association with a healthy food or with a cutting edge mode of fashion)
- entering new markets (consumer or geographical) which were unfeasible with it’s own resources or capabilities
- generating new revenue streams, often with little involvement or additional financial or other resource implications
The key benefit for a licensee (especially manufacturer or retailer) is the ability to significantly increase consumer interest in and sales of its products or services. Licensing can do this by:
- transferring the values and consumer favour towards the property to the licensed product or service
- providing added value and differentiation from competitive offerings
- providing additional marketing support or momentum from the core property’s activity provided by the licensor
- appealing to new target markets who have not historically been interested in a licensee’s product or service
- giving credibility for moving into new market sectors through product extension
- gaining additional retail space and favour