Licensing Agreements - Tressler & Associates, PLLC
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Licensing Agreements

Have you ever considered utilizing a famous brand on your products to boost your sales? Or how about letting someone else use your trademark and IP in a way you’re not going to yourself? If not, you should, because with licensing agreements, you can increase your revenue with little risk to your own business in most situations. These work in two ways. First, they let you use another company’s trademark, patents, copyrights, and other intellectual properties (IP) to improve your revenue in multiple ways. They also allow you to share your IP with other companies who pay you royalties for the profits they make.

Licensing agreements are designed to make two or more businesses more profitable. While you should always proceed with caution, having a corporate law attorney from Tressler & Associates can help protect you from something going wrong with a licensing agreement.

What Are All the Types of Licensing Agreements?

There are four types of licensing agreements. They are each defined by the IP a company is licensing out. There are different rules that the license holder must make to protect the value and sanctity of their IP. A patent that changes one business’s daily process needs different protections than a trademarked logo on another company’s food product.

In all instances, the one giving something typically receives regular payments in return based on the success of the recipient’s use of an IP. These payments are called royalties. If there is an agreement to trade IP, there is still typically an agreement to send royalties.

Patent Licensing Agreements

As their name suggests, these handle an agreement that allows one company to use a patent or patents of another company. Patents are documents that record someone’s ownership of an invention, whether it be a product or process. Patents do not retain ownership in themselves, they serve as proof of ownership. If you create a process that helps your business run, you own that idea, but a patent proves you had it first if someone tries to replicate it without permission. Licensing out a patent means that you are giving or receiving permission to use a patent.

Trademark Licensing Agreements

Trademarks pertain to what makes up a brand. This includes a brand’s name, logo, and/or slogan. A business may want to license out a famous trademark so they can put a famous brand name and logo on their products or media. This is a clever marketing tactic where the licensed brand garners trust and excitement from the brand’s loyal patrons for a product that isn’t technically the brand’s own. 

For example, consider when you see famous brand logos on cereal boxes. The cereal doesn’t own the logo, so they likely got a licensing agreement with the ones who do.

Copyright Licensing Agreements

Copyrights are similar to trademarks in that a company will license out an IP to use for marketing or artistic purposes. Where trademarks pertain to brands, copyrights pertain to what is a part of a brand. This includes characters, visual arts, music, and anything else created and used to support a trademark. For example, Spider-Man’s logo is a trademark, but the character himself and the right to use him is copyright. It’s not uncommon for a licensing agreement to double as a trademark and copyright licensing agreement in one when trademarks and copyrights tend to go hand-in-hand.

Trade Secret Licensing Agreement

These are similar to patents, but the difference is that trade secrets necessitate secrecy, while patents are publicly held IPs. This commonly leads to competitors creating similar products to compete with another company’s patent. A trade secret is not publicly available, such as the formula for Coca-Cola. When licensing out a trade secret, secrecy is imperative, and these agreements can carry heavy consequences for someone who fails to keep the trade secret under wraps.

What Goes Into a Licensing Agreement?

There is some information you can assume needs to be in a licensing agreement, like what IP(s) is being licensed, by whom, and for how long. There are other specifics that anyone looking to make an agreement should include regarding how an IP can be used.

  • What regions of the world the licensed IP can be used in.
  • Whether or not they are the exclusive licensors of an IP in a certain region or adjacent industry.
  • How long the party licensing out an IP will have the right to do so.
  • How much will the IP owner receive in royalties, and when those royalties will be given to the IP owner.
  • What restrictions the IP owner has on how the IP can be utilized.
  • What happens if any of the previously stated restrictions are violated.

The Risks of a Licensing Agreement

With any agreement you make, there will remain risks. When you license out your IP, if someone uses it in a way that damages your IP’s reputation or marketability, a claim of breach of the contract won’t undo that. Your contract can nearly guarantee you’ll be paid for the damage another party does to your IP, but you’ll have to repair its reputation yourself.

The same can be said if you use someone else’s IP. A simple mistake can leave you owing more than you’re making to pay for the perceived damage you’ve done to an IP. 

You Need a Corporate Law Attorney

To adequately protect the IP owner and the party licensing it out, you need a corporate law attorney who can help you write an airtight licensing agreement. The experienced corporate law attorneys at Tressler & Associates have the experience and knowledge to create the licensing agreements you need. We won’t leave open any holes that will leave you vulnerable as an IP owner or borrower. 

You should have financial safety when you’re trying to increase your business’s profitability. For that safety, contact us at Tressler & Associates.

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