A product with a patent can be marketed or sold through a licensing agreement or a franchise agreement. With a license agreement, the patent holder enters into an agreement and charges a fee(s) to another company to create promotional materials for the product. The agreement should clearly state the ownership rights of the product, the fees and royalties involved as payment for the license, and whether the license is exclusive or non-exclusive. Licensing is a useful way of expanding a product's reach and it is easier and less costly than franchising.
Research sample license agreements to obtain an idea of what terms you want to include in the agreement. There are license agreement forms available for use, so drafting an agreement from scratch is not necessary. Look online at form document sites and in your local business supply store for license agreement forms. Distinguish between the agreement's critical elements and those of lesser importance. Consult with an attorney who may be able to assist with the decision on what terms must be in the agreement and which ones can be left out.
Draft the license agreement according to the terms identified in Step 1, or refine a license agreement form to your specifications. To create the contract, find a good license agreement that can be modified according to your business objectives. One of the more critical elements to include in the contract is a statement on the retention of ownership rights over the product. Another is whether the licensee is the only one with licensing rights (exclusive license) or whether the license can be offered to other companies (non-exclusive license). The structure of licensing fees is another critical element; the contract can have a one-time licensing fee for the term of the agreement or the payment of monthly royalties based on sales or other criteria.
Sign the licensing agreement with the licensee. Once the agreement is signed and three business days have passed that allow either of the parties to back out of the contract, the agreement is considered legal and enforceable. The licensee can begin to use the license as agreed to in the contract and must pay the required fees. At this point, you may want to retain the services of an attorney who can help you with the enforcement of the license and, if they occur, any violations of the license.
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