Merchandise licensing has benefits for both the licensor and the licensee. The licensor is able to offer new products that fall outside its core competencies. It also provides critical revenue streams to entertainment producers and brands looking to grow.
What are the advantages of licensing?
The advantages of licensing can be viewed from two perspectives: licensor and licensee. The licensor being able to utilize the licensee’s distribution network to quickly enter into new geographical regions and foreign markets
What is licensing and what do you need to know?
In this article, I will talk more about licensing and what you need to know about it. So, what is licensing? Licensing is a legal agreement made between a licensor and a licensee. The licensor is the owner of a product, idea or service. The licensee is the organization that will manufacture, market, and sell a product, service, or idea.
What is product licensing and how does it work?
Product licensing involves two parties: a licensor and a licensee. The licensor owns the rights to certain intellectual property (IP) while the licensee manufactures products using the IP granted by the licensor via a license agreement.
What is the difference between a licensing agreement and a license?
The licensor (the seller of the license) owns the asset being licensed and the licensee (the buyer) pays for the right to use the license. The licensee pays the owner in exchange for the right to sell the product or use the technology. A licensing agreement inclludes several sections and factors, with details that must be negotiated by the parties.
What are the benefits of brand licensing for both the licensor and the licensee?
Licensing is designed to reduce the risks involved in doing business for everyone involved. From a licensee standpoint, there are fewer risks in product development, market testing, manufacturing, and distribution. From a licensor standpoint, there are fewer risks in the selling and service of what is being offered.
How does the licensor benefit from licensing?
Advantages to the licensor include: The licensor facing lower capital requirements and lower costs due to not having to invest in distribution. The licensor having the ability to generate passive revenues through royalties. The licensor being able to gain the expertise and skills of the licensee.
What are advantages of licensing?
What are the advantages of licensing?it costs less than buying an entire company;you don't pay for expensive and time consuming research and development;you don't pay development costs up front; you pay royalties when you start making sales; and.More items...
What are two advantages licensing?
Advantages and Disadvantages of LicensingAdvantages to LicensingDisadvantages to LicensingYou will not need to incur the costs of producing, promoting, packaging, or selling your product.You will likely lose control over your product, including promotion, packaging, and selling.2 more rows
How does licensing helps a business?
Licensing generally involves allowing another company to use patents, trademarks, copyrights, designs, and other intellectual in exchange for a percentage of revenue or a fee. It's a fast way to generate income and grow a business, as there is no manufacturing or sales involved.
What is the difference between licensor and licensee?
A licensing agreement allows one party (the licensee) to use and/or earn revenue from the property of the owner (the licensor). Licensing agreements generate revenues, called royalties, earned by a company for allowing its copyrighted or patented material to be used by another company.
Why do companies use licensing?
Companies who know their brands well have a good understanding of the equity of the brand. A brand's equity is derived from the awareness and image a brand holds with its consumers. Licensing enables companies whose brands have high preference to unlock a brand's latent value and satisfy pent up demand that exists.
What are the benefits of being a licensor quizlet?
Name at least three benefits of being a licensor. Low risk profits, Market expansion, and Control.
What is the most important step in licensing for a licensor?
One of the most important elements of a licensing agreement covers the financial arrangement. Payments from the licensee to the licensor usually take the form of guaranteed minimum payments and royalties on sales.
What is the purpose of license?
Licensing agreements ensure that you have legal permission to use another person's or business's property.
How important is the licensing agreement?
An effective licensing agreement is the most effective solution for protecting your intellectual property. A licensing agreement allows owners of intellectual property to authorize third parties to use, alter, or resell the property for a mutually agreed-upon price, without transferring ownership to the third party.
What advantage does licensing provide to a consumer products manufacturer?
When you license your brand, you are giving another company permission to use your intellectual property on products they produce and sell. You can earn an upfront advance as well as royalties, which are calculated as a percentage of total sales or net profits, depending on the licensing agreement.
What are the advantages of a licensee?
Advantages to the licensee include: The licensee gaining access to established intellectual property and being able to enter the market more quickly. The licensee not having to pool resources to conduct research and development to develop their own products or services.
What is the difference between a licensee and a licensor?
A licensing agreement is a contract between a licensor and licensee in which the licensee gains access to the licensor’s intellectual property. The party providing the intellectual property is called the licensor while the party receiving the intellectual property is called the licensee.
What is the meaning of "licensor" in a license?
The licensor having loss of control of their intellectual property. The licensor having to depend on the skills, abilities, and resources of the licensee to generate revenues. The licensor being exposed to intellectual property theft by the licensee.
Why is licensing beneficial?
A licensing agreement can be beneficial because both parties get the chance to earn profits.
How does a licensee benefit from a business?
A licensee can benefit from this type of arrangement because it requires less money from them to start a business opportunity. They can purchase a license instead of outright ownership, then begin to make profits right away. It takes less upfront cash to pay for a license. When a licensee can improve upon a product, they can make even more money off their venture. Even if the item wanted is a trademark or brand name, the new business benefits from the reputation and consumer awareness of the information.
What are the advantages and disadvantages of a licensing agreement?
14 Licensing Advantages and Disadvantages. A licensing agreement gives a licensee rights to use a product that the licensor already owns. Numerous items can be part of a licensing agreement, including a trademark , a patent, or even branding. The rights of the licensee are fully outlined in the agreement for the license, ...
What does it mean when a licensee slips up?
One slip-up is all it takes for your items to be distributed illegally, which means you don’t see the royalties on the profits being made. 2. It creates a dependency upon the licensor. When a licensing agreement is signed, then the licensee is taking on all the risk in the arrangement.
How does licensing affect intellectual property?
Once you begin to license your intellectual properties and products, you are exposing yourself to higher levels of exposure. There will be more opportunities for theft, piracy, and misuse because you don’t have full control over how the licensee conducts operations. You can police how your IP is being used to some extent, but you can’t see everything that is being done. One slip-up is all it takes for your items to be distributed illegally, which means you don’t see the royalties on the profits being made.
What are the rights of a licensee?
The rights of the licensee are fully outlined in the agreement for the license, which may allow them to sell items, use a trademark, or take advantage of a specific brand message. The licensee is able to keep the profits earn by their use of the licensed items. In return, the licensor receives an agreed-upon royalty out ...
Why is it easier to enter foreign markets with a license?
It is much easier to enter foreign markets in this manner, as the license allows for the intellectual property to jump border requirements.
Why is licensing important?
Often, licensing is a more lucrative choice for certain products and industries, especially when considering the costs of starting a new business (both time and money), and because licensing gets your product or or service in front of an already established customer base and much wider audience (Abedi, 2018).
What is the purpose of licensing?
The Purpose of Licensing. The main purpose of licensing is two-fold. On one hand, well-established companies have access to capital, expertise, and experience in an already established market. (“Product Licensing,” n.d.).
What is a licensee?
Licensing is a legal agreement made between a licensor and a licensee. The licensor is the owner of a product, idea or service. The licensee is the organization that will manufacture, market, and sell a product, service, or idea. In exchange for the rights to the product or idea, the licensor will receive a royalty.
What are the benefits of franchising?
The benefits of franchising are similar to that of licensing. The franchisor does not incur the cost of developing branch locations – that is the responsibility of the franchisee, though there is generally required some level of training and support. The risk in expansion is lowered exponentially, especially as it pertains to entering global markets Sharma, n.d.).
Why do you need a licensing deal?
In essence, the reason a licensing deal seems like an obvious choice is because you collect a percentage of the revenue generated, and you do not have to do any of the work. You can sit back, relax, and check your mailbox for that ever-elusive return on your investment as the funds begin to roll in.
What are the advantages and disadvantages of a licensor?
One of the biggest advantages for a licensor is that it allows you, the creative genius behind your invention, to continue to do what you love: come up with new ideas for innovative products or services.
What is franchise in business?
A franchise, unlike a license agreement, refers to granting rights of use for service companies or business models rather than products.
What is a brand license?
According to the experts at UpCounsel, “This type of license usually allows a licensee to use a product, line, or certain business item. Licensing simply means the leasing or renting of an intangible asset.”
Know the business licensing lingo
As you embark upon this undertaking, it’s essential to understand the terminology and key definitions involved with the process. (Especially when you’re in the research phase trying to unravel the ins and outs of the process). Use this cheat sheet:
Understand the possibilities of business licensing
With business licensing, you can increase your brand’s reach without worrying about the manufacturing, production, and often even marketing (depending on the agreement). It’s the equivalent of outsourcing business growth, where the licensee takes on the operational duties.
Hire a legal expert
No one knows how to license a business or brand better than a licensing, trademark or intellectual property lawyer. Read articles to acquaint yourself with the process, do your initial research, talk to those in your community with experience. But, when it’s time to start the process, you need to engage a professional.
Do the proper research
Even with a lawyer in your corner, you still need to do your due diligence before licensing your brand. The order of research vs. hiring a lawyer can be a little bit of a “chicken or egg” scenario. Some lawyers may ask if you’ve done proper research before considering licensing opportunities. Others may be able to help with the process.
Take advantage of brand licensing opportunities
While we’ve already established the foundational reasons why brand licensing is beneficial, there are other more specific advantages for small business owners. Once you settle on a business licensing agreement, you can expect the following perks:
How to license your business the right way
When licensing your brand, your business’s reputation is at stake, and there’s a lot to consider. Use this guide to perform the right research and lay the foundation of business licensing.
Why do companies enter into licensing agreements?
The two primary reasons for entering in the licensing agreement are: International expansion of a brand franchise. Need for commercialisation of new technology . Generally, a firm opts for license its products, when the firm holds that the consumer’s acceptance of the product is high.
What is a license for a company?
Definition: Licensing is defined as a business arrangement, wherein a company authorizes another company by issuing a license to temporarily access its intellectual property rights, i.e. manufacturing process, brand name, copyright, trademark, patent, technology, trade secret, etc. for adequate consideration and under specified conditions.
What is a licensee in a law firm?
The firm that permits another firm to use its intangible assets is the licensor and the firm to whom the license is issued is the licensee. A fee or royalty is charged by the licensor to the licensee for the use of intellectual property right. For example: Under licensing system, Coca-Cola and Pepsi are globally produced and sold, ...
What is the simplest form of business alliance?
In finer terms, it is the simplest form of business alliance, wherein a company rents out its product based knowledge in exchange for entry to the market.
Does the licensor have control over the licensee?
However, the licensor has little to no control over the licensee, in terms of production, distribution and sales of the product. In addition to this, if the licensee gets success, the firm has given up profits, and whenever the licensing agreement expires, the firm might find that it has given birth to a competitor.
Why is product licensing important?
The practice allows innumerable brands to expand their product offering while providing additional revenue streams.
What is the benefit of merchandise licensing?
It also provides critical revenue streams to entertainment producers and brands looking to grow.
What is product license?
A product (or merchandise) license allows licensees to leverage popular IP to create branded products, usually for a specific period of time. Once the rights have been secured, the licensee manufactures product using the licensed IP, and in return pays the licensor a royalty for its use.
What is the difference between a licensee and a licensee?
Licensee. A licensee can mean the holder of a license, or in U.S. tort law, a licensee is a person who is on the property of another, despite the fact that the property is not open to the general public, because the owner of the property has allowed the licensee to enter.
What is the status of a visitor as a licensee?
The status of a visitor as a licensee (as opposed to a trespasser or an invitee) defines the legal rights of the visitor if they are injured due to the negligence of the property possessor (not necessarily the owner).
Can an emergency worker get a license?
Historically, emergency workers – police and firefighters – have been considered licensees, but they are barred from recovering from injuries caused by the risks inherent to their jobs. Generally such injuries are instead covered by worker's compensation. A party that grants a license to another.
Does a property possessor have a duty of care?
Under traditional common law, a property possessor (not necessarily the owner) has no duty whatsoever to trespassers. Some states retain the traditional common law rule, while other states, such as California, have imposed a reasonable duty of care toward all people who enter a property.
What is a licensee?
Licensing, on the other hand, is a limited, legal business relationship where a specific party is granted rights to use certain registered trademarks of a brand. The business relationship is between the licensor (the one who owns the trademarks) and licensee (the one who is granted rights to use them).
What are the pros and cons of licensing?
In general, a license agreement happens between two established businesses. The licensee is purchasing the right to use protected marks that are already recognizable and appreciated by a built-in fan base. This makes licensing a secure investment and a great way to boost your business.
Why is franchising important?
Franchising also has the benefit of a shared relationship. The franchisor gets to scale their business rapidly while minimizing some of the work , which is instead done by franchisees. Additionally, the franchisee works with the franchisor to manage the business and learn business skills that they may not know already.
What are the pros and cons of becoming a franchisee?
One of the pros of becoming a franchisee is all the benefits of being a self-employed business owner without the risks of starting a new business. Franchises come with the bonus that they’re already a proven business model with a pre-established customer base.
What is franchising rights?
The franchisor sells the rights to their brand — including products and services, intellectual property and more — to a franchisee, who will open up a separate branch under that brand’s name, which is essentially a duplicate of the original business. Franchises are regulated under the Federal Trade Commission’s franchise rule ...
What is Disney licensing?
More often, Disney signs licensing agreements with certain producers to use their characters and images, which is why you find Disney characters on everything from soap to sleeping bags to T-shirts and clothing. In general, licensing agreements are most often used by brands that are highly recognizable and marketable.
What is the difference between franchising and licensing?
licensing is the limitation placed on licensing agreements. A license is much more limited than a franchise. A license agreement allows for the use of registered trademarks, nothing more.
It Increases Opportunities For IP Theft.
It Creates A Dependency Upon The Licensor.
- When a licensing agreement is signed, then the licensee is taking on all the risk in the arrangement. They are dependent upon the quality of the IP being used to make their own profits. If they do a great job and earn plenty of cash, the licensor might ask for a renewal that costs more than the initial license. There is also no guarantee of exclusi...
It Creates Added Competition in The Marketplace.
- Many licensors have found that their licensees eventually become competitors in their own marketplace. That creates a difficult situation, as one company or the other stands to lose from the process of selling IP in the same way. For that reason, many licenses include geographic barriers to protect against a needlessly competitive marketplace. With internet access growing …
It Is Offered For A Limited time.
- Most licenses are only offered for a limited time. Although that time period may be 5-10 years, there is an expiration date which must be considered by the licensee. Is it worthwhile to invest time, effort, and cash into the promotion of goods or services that may not be available to them at the end of the licensing period? Is there a guaranteed renewal rate for the license, especially if th…
It Could Damage The Reputation of Both Parties.
- When one element of the relationship is mismanaged with licensing, then both parties can see a reduction in the brand reputation of the IP involved. If multiple licenses are offered, then the reputation may suffer globally, affecting multiple businesses who are not involved in the situation. The only way to resolve this potential management is to have good quality management practic…
It Is Not A Guarantee of Revenues.
- There is no guarantee that a licensing agreement will generate cash. You could agree to a specific royalty rate with a licensee, then never see anything because the licensee is unable to generate any sales. Many products don’t get licensed either, even when they are offered at discounted rates, because there is no interest in the product. You might face returns of damaged merchandi…
It Takes Time For Royalty Payments to arrive.
- In a franchising agreement, royalties might be paid weekly out of the sales that are generated at the register. This can be an automatic process, withdrawn directly from a bank account or the batch sales created. For many licensing agreements, however, the royalty payments are offered just once per quarter. That means it could be 5-6 months before you see your first meaningful ro…
It May Lead to Royalty Litigation.
- One of the biggest issues that licensors face with licensing agreements is a refusal by the licensee to validate royalty statements. They may not let you audit their statements at all for accuracy. This does allow you as the licensor to take legal action, but that tends to get very expensive, very quickly. For that reason, arbitration clauses are becoming a common componen…