Why Do Companies Use Licensing Agreements
For patent holders, the licensing model offers the following advantages: The license generally involves the ability for another company to use patents, trademarks, copyrights, designs and other intellectual imors against a percentage of turnover or a tax. It is a quick way to generate revenue and develop a business because it is not involved in production or sales. Instead, licensing usually means using the pipeline and infrastructure of an existing business in exchange for a small percentage of revenue. In addition to the details of all parties involved, the licensing agreements define in detail how licensed parties can use real estate, including the following parameters: Most licensing agreements also address the issue of quality. For example, the licensee may enter into the contract conditions that require the purchaser to provide prototypes of the product, mockups of the packaging and even occasional samples for the duration of the contract. Of course, the best form of quality control is usually achieved before the fact – by carefully checking the reputation of the licensee. Another common quality provision in licensing agreements is the method of disposing of unsold products. If stock items are sold as cheap knockoffs, this can damage the licensee`s reputation in the market. – What are the rights of companies involved in the performance, distribution and production of music recordings? 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. – What are the main elements of a licensing agreement? What are the main issues to consider when negotiating a licensing agreement? Licensing has certain risks and disadvantages. The company may lose control of the production and marketing of its products in other countries. As a means of entering the international market, licensing may also be less cost-effective than other decisions, since returns must be distributed between two parties. There is even a risk that the foreign licensee may sell a competing product similar to the expiry of the license agreement. Other risks and problems are the choice of a partner and all general uncertainties in the business with an international partner, including language, culture, political risk and currency fluctuations. Alternatives to licensing are exporting, acquisitions, the creation of a 100% international subsidiary, franchising and the formation of strategic alliances.