A licensing agreement is a legal contract between two parties, the licensee and the licensee. In a typical licensing agreement, the donor grants the purchaser the right to manufacture and sell products, apply a brand name or trademark, or use the licensee`s patented technology. In return, the taker generally submits to a number of conditions relating to the use of the licensee`s property and undertakes to publicize the payments in the form of royalties. As this simplification suggests, licensing is a symbiotic relationship between companies that, in a sense, do not correspond to intellectual property. Companies with intellectual assets that are more valuable than their current marketing structure can support the search for external partners to maximize returns on their assets. For example, a licensee of a known brand must not have the ability to manufacture and distribute all products that could be marketed under the brand name. In addition, it is not in the strategic interest of the company to participate in different types of production when these activities are not within its jurisdiction. In the meantime, other companies may be technically qualified in the manufacture of these products, but name recognition and access to distribution channels, which have a large brand name, may be lacking. A licensing agreement allows everyone to exploit their strengths. Another important element of a licensing agreement defines the timing of the agreement. Many licensees insist on a strict marketing date for products that are granted to external manufacturers. Finally, it is not in the licensee`s interest to license a company that never markets the product. The licensing agreement also contains provisions relating to the duration of the contract, renewal options and termination terms.
Licensing agreements cover a large number of known situations. For example, a retailer could enter into an agreement with a professional sports team for the development, manufacture and sale of goods bearing the sports team logo. Or a small manufacturer could concede a production technology owning a larger company to gain a competitive advantage rather than investing the time and money to develop its own technology.