What is Product Licensing Agreement Drafting?
A product licensing agreement is a legal contract between an owner of intellectual property (IP) or other products and a licensee who has permission to use, make, or distribute the products for a fee. It should be specific about the grant of rights, compensation, and other essential terms.
Read the rest of this article for clarity about key terms to include in a product licensing agreement, how to draft it, and when to consult a lawyer for help.
What are Key Terms in a Product Licensing Agreement?
A product licensing agreement should contain the following components:
- Grant of rights. This section has to specify if the licensee has exclusive or non-exclusive rights.
- Territory. State the geographic areas or regions in which the licensee can sell the product.
- Duration and termination. Outline the time period for the contract and how it can be terminated. Explain what conditions can trigger contract termination.
- Compensation. Verify how the licensor will be compensated, such as regarding initial fees and a percentage of sales.
- Quality control. The licensor should have the right to inspect the product to protect their reputation.
What are Tips for Drafting a Product Licensing Agreement?
Make sure your product licensing agreement clearly defines the parties’ rights and obligations to prevent disputes. Here are some tips to bear in mind.
Clarify Exclusivity
The agreement should state if the license being granted is exclusive or non-exclusive. Be specific about what rights the licensor maintains under the agreement.
Define Products
Provide details about the approved goods and what sales territories apply. You should also identify any relevant intellectual property and technical specifications to give as much detail as possible. For increased clarity, you can also specify what is excluded.
Explain Payments
Your agreement must include clear and detailed information about upfront fees, royalties, payment dates, and advances. If royalties are calculated according to sales, make sure you carefully calculate them.
Set Product Standards
Be detailed about the product standards to maintain and what procedures are established for approving tasks. Depending on the type of product, quality standards can include product labelling, branding standards, certifications, and quality control processes.
Explain Parties’ Responsibilities
You should allocate responsibility to parties by specifying what they’re responsible for doing. For example, a product owner or licensor will be responsible for supplying training, providing approvals, and maintaining IP registrations. By comparison, the licensee will have to meet agreed quality standards and keep payment and sale records.
Consider Termination
Outline what can trigger contract termination, such as contract breaches or the failure to fulfill obligations. You should also address what will happen after the agreement ends, such as what happens to outstanding payments and how confidential information must still be protected.
Should You Hire a Lawyer for Product Licensing Agreement Drafting?
It’s not always necessary to hire a qualified lawyer to draft your product licensing agreement. However, seeking legal advice is important if your agreement is of significant commercial value, it contains exclusive rights, or your IP ownership is at risk.
Whatever the case, hiring a lawyer can assist you in various ways, such as by:
- Identifying the intellectual property involved. They’ll determine which trademarks, designs, and other IP are covered by the agreement and establish their ownership.
- Defining the license scope. They’ll detail if the licensee is allowed to market, sell, or commercialize the product, while establishing non-permitted uses.
- Specifying territory and duration. They’ll explain where the product can be distributed and how long the contract will last depending on your specific arrangement.
- Setting product quality standards. They’ll establish manufacturing requirements and inspection rights to maintain a high quality of standards.
- Fairly allocating responsibilities. They’ll state both parties’ obligations so they’re on the same page.
- Ensuring legal compliance. They’ll check that the agreement terms are aligned with all relevant laws and regulations.
- Negotiating the agreement terms. A lawyer can assist you with negotiating terms in the contract to make the final agreement more balanced and fair for both parties.
- Reviewing your agreement. If you’ve already drafted your product licensing agreement, you should hire a lawyer to review it for you so that you feel confident about its terms.
Where to Find and Hire a Lawyer for Product Licensing Agreement Drafting
If you need a lawyer, you don’t have to search for one by calling people in your networks or traditional law firms in your area. You can use an online legal platform that connects you to lawyers who are experienced and reputable.
ContractsCounsel is one of the largest online marketplaces that gives you access to lawyers who are vetted on the platform.
If you want to ask a lawyer to draft your product licensing agreement, the process is easy. Here are the steps to follow:
- Go to the ContractsCounsel marketplace.
- Select ‘One-time project’ and ‘Create or update contract.’ If you need a lawyer to review your agreement, you should select ‘Review contract’ instead.
- Post your project, which is free to do on the platform. Include some information about what you require so you can connect with the right lawyers.
- Wait for bids. You’ll receive multiple bids from lawyers directly on the platform who are ready to assist you, instead of having to search for lawyers.
- Review the platform’s lawyer data. This information includes the lawyers’ location, years of experience, field of expertise, credentials, and client ratings for previous projects that they’ve completed on the platform.
- Select a lawyer to work with. They’ll draft your product licensing agreement for a flat fee.
