Why Would A Company Use A Licensing Agreement


Posted by lapi | Posted in Uncategorized | Posted on 15-04-2021

Licensing agreements are often used for the commercialization of technologies. Licensing is increasing as manufacturers and retailers work to expand their core business and change their strategies to include more licenses. For example, Merck and Upjohn have authorized organizations in other parts of the world to manufacture and sell their pharmaceuticals. Other companies using licensing agreements in this way are McDonald`s, Nestlé, Anheuser-Busch and KFC. As a licensee, you are expected to present the legal agreement ensuring that both parties are fully aware of their respective rights and obligations and beyond simply setting royalties. Good legal advice is usually required to negotiate things: the licensing agreement should contain a language dealing with the issue of property disputes. What happens, for example, if someone challenges ownership of a trademark you have licensed? Or, what happens if someone plagiarizes the copyrighted work that is licensed? Both parties to the licensing agreement should agree on how to deal with these issues. Typically, a trademark holder issues a licence to use trademark rights in areas where they do not have the expertise, infrastructure or capital resources to maximize the value of the right. While the licensee exploits trademark law, the licensee is betting that the name or symbolic recognition of the property will affect consumers and encourage them to purchase a particular item. The characters who have been loved by brand licensing relationships are Mickey Mouse, Barbie and the King of Lions. An important trend has been that manufacturers and retailers are building the core of their branded products business. One of the most important elements of a licensing agreement is the financial provision it contains.

Payments to the licensee are usually made in the form of royalties on guaranteed sales and minimum services. Depending on the expertise of the licensee and the property concerned, royalties are generally between 5 and 11 per cent. In economics, licensing agreements or agreements are beneficial to both parties. The licensee provides ownership and the taker brings specialized knowledge in the sector or territory covered by the licence. The resulting relationship is similar to a joint venture or partnership. Licensing agreements include various types, including copyright licensing, patent licensing, product licensing, brand licensing and software licensing. In the early 2000s, a growing number of technology companies began implementing IP licensing programs to turn dormant projects into revenue, open new markets and evaluate potential business partners. These companies carried out inventories of their knowledge bases and patent families and identified technologies that were not at the heart of their business but nevertheless offered some potential for development. They then tried to license these technologies to other companies. In May 2018, Nestlé and Starbucks entered into a $7.15 billion coffee licensing agreement. Nestlé (the licensee) has agreed to pay $7.15 billion in cash to Starbucks (the licensee) for exclusive rights to sell Starbucks products (single serving coffee, teas, beans, etc.) through Nestlé`s worldwide distribution network. In addition, Starbucks receives royalties from coffees and packaged teas sold by Nestlé.

Licensing agreements and agreements must be beneficial to both parties.

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