How to Create a Brand Licensing Agreement

Aug 05, 2023

A brand licensing agreement serves as a crucial contract that outlines the terms of collaboration between two companies. In this arrangement, the licensee, who obtains the rights to license a brand, typically pays a portion of each sale of the licensed product back to the licensor, the brand being licensed. To ensure a mutually beneficial relationship for both parties, it's essential to craft a well-defined and comprehensive brand licensing agreement.

Here are nine key factors to consider when creating one.

Work with Experienced Professionals

To ensure a watertight agreement, it is advisable to work with a reputable brand licensing law firm like ours. With three decades of experience in the licensing and branding industry, we have handled agreements with renowned global brands. Our expertise culminated in the creation of "Licensi," a dedicated entity exclusively focused on licensing and branding.

Define the Intellectual Property

Clearly outline the scope of the intellectual property being licensed in the agreement. It is essential to specify what is included and excluded as part of the licensing arrangement.

Exclusivity

Determine whether the brand licensing agreement will be exclusive or non-exclusive. Most agreements are non-exclusive, allowing the licensor to license the brand to multiple competing companies. In certain cases, offering a limited number of exclusive licenses may command higher royalties and give licensees a competitive advantage.

Royalties

Detail the financial compensation structure for licensing the brand's intellectual property. Common payment structures include initial flat fees, ongoing royalties based on unit price or sales revenue, and Minimum Fee Guarantees (MG or MFG) irrespective of product performance. Clearly state any maximum discount limits for licensed products.

Quality Assurance

Include quality assurance terms to protect your brand's reputation. Define any restrictions for the licensee regarding altering brand elements such as logo, fonts, and colors, or adding new code to licensed software.

Timeframes

Decide on the duration of the licensing agreement. While a one- to two-year agreement allows assessment of product popularity before committing to a long-term deal, there is no ideal duration, and it should align with your brand's strategy.

Geographic Regions

If working with multiple licensing partners, specify the regions in which they are allowed to use your intellectual property. This prevents competition between partners and potential conflicts.

Shipping Responsibilities

Determine shipping responsibilities, including picking, packing, and shipping items to customers. Clarify where inventory will be held, whether at your warehouse, the licensee's, or a third-party logistics partner's distribution center.

Termination Clause

Include a termination clause that outlines when the agreement ends, how either party can terminate prematurely, and the notice required for termination. Address whether the agreement auto-renews and, if so, any changes in royalty fees upon renewal.


By considering these nine factors and creating a well-structured brand licensing agreement, both licensors and licensees can establish a strong and mutually beneficial partnership. Our law firm is here to provide expert guidance and support throughout the process, ensuring a successful brand licensing venture for all parties involved.