What Is a Licensing Agreement Review?
A licensing agreement review ensures that the contract between two parties includes all necessary legal elements. For example, when signing a license agreement, one party agrees to use another’s property for personal or commercial use.
For example, a company must sign a license agreement, a written contract, with a software developer to use their CRM (Customer Relations Management System).
Many licensing agreements today are for technology and SaaS (Software-as-a-Service) products. These agreements, such as SaaS agreements, grant users access to features and protect developers’ property.
At its core, a license is a permit to do something. Therefore, licensing agreements are mutual agreements between two parties to provide and use services in certain ways. They ensure best practices, waive liabilities, and prevent intellectual property theft or trademark.
Here is an article that defines a license.
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Types of Licensing Agreements
Licensing agreements, or license contracts, grant users permission to use property owned by another party. The party issuing the agreement is known as the licensor, and the user is the licensee.
Below are three common types of licensing agreements. Before drafting a document, be sure to research the type of licensing agreement you need. Then, consult with a licensed agreement lawyer.
Trademarks
A trademark is a word, phrase, or symbol registered by a company. For example, the iconic Nike swoosh is a trademark, meaning you cannot replicate it, print it, or sell products with its likeness without permission from Nike.
A trademark licensing agreement permits users to redistribute a proprietor’s trademark on approved products and under agreed-upon circumstances.
Brands that collaborate may sign a trademark agreement to market each other’s products to their respective audiences.
Technology
A technology license agreement allows you to use, modify or, sometimes, even sell technology owned by another party under a certain set of conditions.
Every technology licensing agreement is different; some may have more restrictions than others. However, even some technology licensing agreements allow companies to receive compensation whenever another party sells their product.
Trade Secrets
Many businesses develop specialized formulas or methodologies that allow them to perform work in a specific way. For example, suppose they grant another individual or company a trade secret license. In that case, that party can use their trade secrets.
Trade secret licensing agreements can allow companies to share some of our processes without jeopardizing confidentiality. They can also set restrictions on how trade secrets can be applied to minimize competition.
All trade secret licensing agreements must include some form of compensation between the licensor and licensee. For example, the owner may receive royalties based on sales or a lump sum payment.
Here is an article with ContractsCounsel’s guide to licensing agreements.
What Is the Purpose of a Licensing Agreement?
A licensing agreement ensures that you have legal permission to use another person's intellectual property in a certain way, for owners of intellectual property, licensing agreement insurance that you are compensated for your work.
A licensing agreement also prevents someone from taking your intellectual property and publishing it as their own. This is especially important if you have applied for a patent.
By signing a licensing agreement, you avoid facing accusations of copyright infringement and any resulting penalties. While a licensing agreement doesn't grant anyone ownership of another party’s property, it allows them to use it for a specific purpose and under a set of terms and conditions.
Additionally, licensing agreements allow parties to prevent their intellectual property or technology from being used in damaging ways.
For example, a musician may not allow someone to publish their song on a certain platform; a brand could prohibit someone from publishing their logo on certain merchandise or advertising it in ways they deem unacceptable.
Here is an article on the legal importance of licensing agreements.
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What Should I Look for in a Licensing Agreement?
Although every licensing agreement is different, there are certain elements that every good licensing agreement should include.
- Exclusivity. Exclusivity prevents competition. For example, franchisees are only allowed to operate in certain areas to prevent a direct competitor of the same franchise from setting up business near them.
- Payments. Compensation is necessary for any valid licensing agreement. While many use a royalties-based model, some licensing agreements will require a flat fee of money instead.
- Terms of use. Parties have the right to determine how another party may use their owned property. For example, your brand may only allow licensees to print your logo on certain types of products or advertise it on certain platforms.
- Duration of license. You may have to renew or purchase another license if you want to use the property differently. For example, you may have a license to operate a song in a radio ad. Still, you need another agreement if you want to include it in a YouTube video.
- Sub-agreements. Many licensors incorporate secondary agreements into their licensing agreements. For example, someone issuing a trade secret licensing agreement may also include a non-disclosure and confidentiality agreement.
Here is an article with tips on creating a mutually beneficial licensing agreement.
Who Can Review a Licensing Agreement?
A contract lawyer is the best person to renew a licensing agreement. Experienced attorneys know what to look for in a document, including any and all necessary terms. Depending on your industry, you may hire a specific type of lawyer to review your agreement.
For example, a software development company might hire a technology lawyer to review its software license agreements.
Even if you write your licensing agreement yourself, it's advisable that you seek legal consultation before having anyone sign it. This is because of certain legal requirements you may not be aware of, and excluding them could render your agreement invalid.
Here is an article on how much a licensing agreement costs and how to find a reputable lawyer to review yours.
How Long Does It Take to Review a Licensing Agreement?
The amount of time it takes to review a licensing agreement depends on the nature of the agreement. For example, some licenses are more complex, so they will naturally take longer to review than a more straightforward document.
Get a free consultation with a contract lawyer to determine how long it will take for your licensing agreement to be thoroughly reviewed.
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