A licensing agreement is a legal arrangement between two parties known as the licensor and the licensee. The licensor gives the licensee the right, under a traditional licensing agreement, to manufacture and sell products, to use a brand name, copyright, or trademark, or to use proprietary technology owned by the licensor. In return, the licensee normally submits to a variety of conditions relating to the use of the property of the licensor and agrees to make payments known as royalties. Licensing agreements include all kinds of property rights including software, intellectual property, commercial property, etc.
A large variety of well-known situations are protected by licensing agreements. A retailer could, for example, negotiate with a professional sports team to design, manufacture, and sell products bearing the logo of the sports team. Some license agreements are fairly lengthy and complicated documents because of the legal grounds they must protect. But the majority of such agreements address the same fundamental issues. These include the scope of the deal, including exclusivity or regional limitations; economic implications, including the advance payments required, royalty rates, and the measurement of royalties; minimum revenue assurances; time schedules, including market dates, contract term, and renewal options; evaluating and quality management privileges of the lessor, including protocols to be followed; minimum inventories needed to be preserved; returns and allowances, eventually.
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