Licensing Agreement Cost

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How much does a licensing agreement cost? A licensing agreement is a legal contract that gives one party the right to use another party's property under set terms and conditions. The property owner is called the licensor, and the party using the property is the licensee .

When a licensor and a licensee execute a licensing agreement, the licensee is granted legal permission to use the specified property. The property involved in these agreements is usually intellectual property like patents, trademarks , and copyrighted materials.

For example, when a company wants to use a song in a commercial, they must have a licensing agreement with the musical artist granting permission to use the work.

If a party does not have a valid licensing agreement, it can lead to significant legal ramifications like a lawsuit for copyright infringement. This contract is vital, so it must be drafted correctly. Many people choose to hire an intellectual property lawyer to draft a licensing agreement.

How much will it cost to hire a lawyer to draft a licensing agreement? Let's explore this question and go over some general information about licensing agreements.

How Much Does a Licensing Agreement Cost?

The cost of a licensing agreement will vary based on several factors, like the specific type of licensing agreement needed. There are four main types of licensing agreements:

  • Trade secret license agreement. For the use of an entity's trade secrets
  • Trademark license agreement. For the use of an entity's licensed trademark
  • Patent license agreement . For the right to sell, use, make, distribute, or export a patented product
  • Copyright license agreement . For the right to use, reproduce, and sell a copyrighted asset

Each of these licensing agreements deals with a different type of intellectual property, and some contracts will be more complex than others.

It is common for licensing agreements to include payment of royalties for using the property. If a company is making money off another party's property, the party will expect some sort of compensation.

An experienced intellectual property lawyer will know what clauses and terms must be included in the agreement to protect both parties and be legally enforceable in court should a dispute arise.

Based on ContractsCounsel's marketplace data, the average cost of a licensing agreement is $711.90 .

What's Typically Included in a Licensing Agreement

Licensing agreements will vary based upon the type of property being licensed, the needs and requests of the parties, and the state in which the contract is executed.

Most licensing agreements will include the following key terms:

  • Exclusivity. License agreements can be either exclusive or non-exclusive. When a license is exclusive, the property holder can only license the asset to one party for use. If the agreement is non-exclusive, the property owner can lease to as many customers as they want.
  • Territory. The license should specify whether it applies worldwide or just to a specific region.
  • Use. Depending on the type of property being licensed, the agreement should include a use clause that specifies how and when the property can be used. A use clause may dictate that a certain product can only be sold online, not in brick-and-mortar stores.
  • Confidentiality. Confidentiality is essential when licensing trade secrets because it protects the property owner's intellectual property from those who haven't signed a licensing agreement.
  • Duration. Licensing agreements can be indefinite or can be valid for a specified amount of time. Sometimes these agreements have terms for renewal of the license.
  • Payment and royalty rates. The payment schedule for a licensing agreement and royalties can be set up in many ways. Sometimes payments are lump sum while others are a percentage of sales paid periodically.

How Do Licensing Agreements Work?

A licensing agreement is essentially written permission for one party to use another party's property. Usually, the property is a form of intellectual property like trade secrets, a trademark, a copyrighted asset, or a patent.

The licensee will use the licensor's property, and in exchange, the licensee will pay the licensor a fee or royalty. Royalties are typically calculated based on a percentage of the licensee's profit while using the property.

Some examples of property that can be licensed using a licensing agreement include:

  • Computer software
  • The use of a sports team logo
  • A song
  • The use of a patented product

While using the specified property, the licensee must adhere to all the terms and conditions agreed upon in the licensing agreement.

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Examples of Licensing Agreement Projects

Licensing Agreement Drafting

When entering a business relationship where one party wants to use another party's property, most people choose to hire an intellectual property lawyer to draft the licensing agreement.

An experienced licensing agreement lawyer will know what terms and clauses must be included in the contract to protect both party's interests and comply with all contract laws .

Licensing Agreement Review

If two parties already have an active licensing agreement, they may need a lawyer to review the document to ensure it is fair and legal. Parties may seek a legal review if the contract term is coming to an end and consider renewing the licensing agreement.

Licensing Agreement Disputes

A licensing agreement dispute will arise if one party believes that the other party breached the contract. This could happen if either party goes against any agreed-upon clauses like terms of use or payment of royalties.

If a party believes that a breach of contract has wronged them, they should consult with an intellectual property lawyer to further understand their rights under the licensing agreement.

Drafting a Licensing Agreement Cost

Drafting a licensing agreement can be a complicated job that usually requires some expert knowledge in the field of intellectual property. Intellectual property attorneys who specialize in licensing agreements may charge higher rates than a typical contract lawyer.

According to ContractsCounsel's marketplace data, the average licensing agreement drafting costs are $680.00 across all states.

Reviewing a Licensing Agreement Cost

Reviewing a licensing agreement is also a job that will require specialized knowledge. The attorney needs to have experience with contract law and be familiar with the intricacies of intellectual property law.

ContractsCounsel's marketplace data shows the average licensing agreement review costs to be $733.17 across all states.

How Do Lawyers Charge for a Licensing Agreement?

Lawyers who are hired to draft a licensing agreement usually charge clients one of two ways: hourly or by flat fee.

Hourly Rates for a Licensing Agreement

An hourly rate fee structure is a common way for lawyers to charge clients for their services. A lawyer will communicate their set hourly rate and then bill a client for hours spent working on their case or project.

This fee structure ensures that a lawyer is fairly compensated but could lead to a client being surprised by an unexpectedly high bill.

The marketplace data for ContractsCounsel shows the average hourly rate for an intellectual property lawyer ranges from $250 - $350 per hour.

Flat Fee Rates for a Licensing Agreement

When a lawyer is hired for a specific project like drafting a licensing agreement, they may just charge a client a flat fee for the entire job instead of billing hourly.

An experienced lawyer can estimate the time necessary to complete a project. The flat fee eases the client's concerns because they know exactly how much legal services will cost.

ContractsCounsel's marketplace data shows the average flat fee rate for licensing agreement costs to be $711.90 .

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