Overview of a Business Licensing Agreement
Intellectual properties can be valuable to the rights' owner and the entity that wants to use those intellectual properties. Signing business licensing agreements is akin to forming partnerships. Music publishers partner with commercial advertisers. Fortune 500 companies partner with start-ups and established brands partner with manufacturers in mutually exclusive relationships every day.
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Why Use Agreements?
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Signing an agreement clarifies the rights extended to the parties in question. The license holder profits by charging an upfront fee or royalty-based compensation. The licensor also extends its reach into other markets by piggybacking on the efforts of the licensee. In this partnership, the licensee benefits by riding the coattails of the brand established by the licensor. The licensee may also be using the license as a way to grow his business by using tools that may not have otherwise been available to him without the license.
Copyright, Mechanical and Master Rights License
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Advertisers purchase copyright usage licenses when they use popular music for commercials. They use the popularity and familiarity of the song to draw in fans of the music into buying their product. Record companies who want their artists to be instantly discovered with sign mechanical license for the use of previously recorded songs to be re-recorded by their new artists. An AllBusiness article says that the agreement should spell out the purpose of using the copyrighted material, where it is going to be used and how long the license will be extended..
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Patent License
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Patent license protects inventors from anyone else using their unique concepts and inventions for profit without their permission. Since the internet age began, there has been an increase in software patents and electronic device patents filed. In Drafting Technology Patent License Agreements, Michael J. Lennon says that patent license agreement are use for "inventions in any and all patents and applications throughout the world including utility, models, design patents, and divisionals." Patent licenses are common when an inventor needs to bring in a partner to help produce and market the invention.
Trademark
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Trademark licensing hinges on leveraging the power of an established brand for the marketing and promotion of another brand. Walt Disney Company licenses its cartoon characters to clothing manufacturers, watch makers and various other entities that produce items to be consumed by children. In the book The Trademark Guide, Lee Wilson writes, that a trademark license request is significant for the licensor because it is confirmation that their brand has established itself as a respected brand. It's also publicity the licensor gets paid for.
Breaking the Agreement
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A licensor may include clauses in the agreement that allow him to break the contract if the licensor feels that the licensee's efforts have a negative effect on their brand or have leaked information about their patent. If a business license agreement is broken, it could result in substantial punitive damages the licensee has to pay to the licensee.
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