Licensingpages / Insight / What is Brand Licensing?

The definition of Licensing aka The definition of Brand Licensing:

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. We would always recommend using a lawyer to execute all legal documents, however being able to present your lawyers with a basic framework of a licensing agreement, such as ours, with your key commercial terms included, will help to reduce consultation time and costs at the initial stages of the legal process.

The word ‘license’ can be spelled license or licence (licensing). Licence is a noun and license is a verb. Before taking using a trademark, you apply for a licence, but the licensor must license you to use it. In the USA they use “license” as a noun.

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The Licensing Process

We have devised a flowchart to demonstrate the processes involved in licensing:

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 Benefit of Licensing for Licensees

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