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Distribution and Licensing Agreement Drafting: Key Terms, Drafting Tips

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Quick Facts — Distribution Agreement Lawyers

What is Distribution and Licensing Agreement Drafting?

A distribution and licensing agreement is a combined commercial contract. A licensing agreement enables a partner to use the other’s intellectual property (IP) while a distribution agreement enables the party to purchase and resell products.

So, a distribution and licensing agreement is when a rights holder enables another party to market, sell, and/or manufacture goods.

Here’s a breakdown of what key terms to include in a distribution and licensing agreement, how to draft it, and why you should consult with a qualified lawyer for assistance with the drafting process.

What Key Terms are in a Distribution and Licensing Agreement?

A distribution and licensing agreement should contain the following information:

  • Territory. Specify the geographic location and boundaries for licensing and distribution to provide clarity and avoid unauthorized activity.
  • Exclusivity. You should explain if the partner possesses exclusive rights or not.
  • Financial terms. Provide information about all payment terms, including minimum order quantities and wholesale product pricing.
  • Term and termination. State how long the distribution and licensing agreement will last, as well as what conditions trigger termination.
  • Grant of rights. The agreement must clearly state what rights the licensee has, such as in terms of using IP.
  • Products and services. Detail the products and/or services that are included in the agreement.
  • Minimum sales. The agreement might require that the licensee or distributor achieves minimum sales or orders in order to meet performance targets.
  • Governing law. State the governing law and how disputes will be resolved, such as via arbitration or mediation.

What are Tips for Drafting a Distribution and Licensing Agreement?

When drafting a distribution and licensing agreement, there is additional information to include so that it’s clear and specific to prevent disputes between parties.

Define the Products

Avoid being vague about what products are covered by the agreement. Describe them by including product specs, packaging requirements, and other details.

If new products are added later, this will help to distinguish the offerings. You should also specify in the agreement if new or changed products will be added to the product list automatically or if parties must agree in writing before adjusting the agreement scope.

Clarify Exclusivity

If your distributor is going to receive exclusive rights under the agreement, your contract must explain what exclusive means to avoid confusion. Does the exclusivity apply to certain products, customers, or territories? You want to ensure this is clearly defined.

Distinguish Between Rights

Since this is a combined contract, you want to distinguish between licensing and distribution rights. This will help you to clarify the parties’ responsibilities and obligations, preventing uncertainty.

Explain the Order Process

You should figure out what ordering and supply process your agreement will cover. Include information about how orders are submitted and any minimum order quantities you require. You should also clarify payment terms and what happens if the supplier isn’t able to complete orders.

Protect Your IP

Your agreement must protect your trademarks, copyright, software, and patents. You can do this by clearly stating that the license being provided doesn’t transfer IP ownership and IP ownership rights remain with the rightful owner.

Fairly Allocate Liability

You should specify which party is responsible for issues such as customer claims, warranties, recalls, and more. Make sure that all indemnity provisions are aligned with these responsibilities so that there’s consistency throughout your agreement.

Include Reasonable Performance Triggers

It’s important to specify sales targets so parties are on the same page. Make them reasonable and fair. Gaining this clarity will also ensure you don’t get stuck in a long-term agreement that’s not performing well.

How Does a Lawyer Draft a Distribution and Licensing Agreement?

A lawyer is worth consulting if you need to write a distribution and licensing agreement. This is because they will help you identify hidden risks and protect your interests.

Here’s a rundown of some activities a lawyer will conduct during the agreement drafting process:

  • Identifying the nature of the commercial relationship to clearly specify both parties’ roles and prevent confusion.
  • Defining the agreement scope. A lawyer will ensure all products, IP, and services are properly detailed in the agreement.
  • Structuring the licensing rights. A lawyer knows how to correctly grant all relevant rights. They’ll also help you select between exclusive or non-exclusive licenses.
  • Writing clear commercial terms, such as regarding discounts, royalties, and commission.
  • Allocating responsibility between parties. A lawyer will consider which party should be liable for marketing, product quality, and other obligations.
  • Complying with all laws and regulations. They’ll review the agreement against the relevant laws and regulations to ensure compliance.

Where to Find a Lawyer for Distribution and Licensing Agreement Drafting

If you’re ready to hire a lawyer to draft your distribution and licensing agreement, you don’t have to search far and wide for a suitable one. Online legal platforms such as ContractsCounsel make finding a lawyer a smooth process.

ContractsCounsel is one of the largest online legal marketplaces where you can easily connect with a curated network of vetted lawyers from the comfort of your home.

To request that a lawyer on the ContractsCounsel platform drafts your distribution and licensing agreement, here are the steps to follow:

  1. Go to the ContractsCounsel marketplace, where it’s free to post your project.
  2. Mention some information about what you need to match with suitable lawyers.
  3. Receive lawyer bids. You’ll receive multiple bids from lawyers on the platform.
  4. Review the lawyers’ profiles. ContractsCounsel offers lawyer data to help you select the most suitable lawyer, such as the lawyers’ credentials, client ratings for previous projects, years of experience, and field of expertise.
  5. Connect with a lawyer and hire them to draft your distribution and licensing agreement for a flat fee.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


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