Brand License: Everything You Need to Know
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. 3 min read
A brand license is something that a licensor grants to a licensee to use a company brand. Brand licensing derives from its own language and terminology, and leasing a copyrighted or trademarked identify includes:
- Brand names
- Brand signatures
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. For instance, intangible assets include songs or cartoon characters, and can even include individual names, such as Michael Jordan. Also, it could be a brand, such as Ritz-Carlton.
Brand Licensing Breakdown
To know how you can craft a solid brand licensing agreement, or agree to one, you should know the following definitions:
- Licensor: Brand owner and rent of rights
- Licensee: Business that’s renting rights to use a certain brand
- Contractual Agreement: Formal document that defines the terms of the agreement and how the licensee may use the brand, including the amount that the licensor will be paid
- Royalty: In most circumstances, a licensee accepts the payment terms of the licensor and it comprises a minimum set amount and a percentage on all sales that surpass the minimum pay amount.
Brand License Essentials
Brand licensing is one of the most popular ways to extend brands because it permits companies to introduce new products or services without exhausting costs to do so. Rather, the brand gives its name to a maker or manufacturer that includes all marketing and production efforts on behalf of a new product. The agreement also permits businesses that market a service or product to rent or lease a brand from the owner who owns the license program. For instance, beer companies in Europe may lease the brand name to American brewers.
Brand licensing is also one of the methods that’s least explored in terms of entering a new product category. The process can be time-consuming and lengthy, but one should also bear in mind that the goal is not to obtain a license but to ensure that it succeeds. If expedited in an efficient manner, one can achieve a large degree of success.
On the other hand, if a licensor or licensee does not live up to the agreement, it affects sales negatively and damages the brand’s reputation.
From a consumer’s standpoint, licensed products resemble the original brand products. Before you enter into an agreement, ensure that the contract results in products that meet all brand aspects. Such a contract should include:
- Usage purposes
- Application limitations
- Geographic areas
- Payment schedule
Moreover, you should use an attorney to review the agreement before signing it.
When it comes to legalities, brands or trademarks help consumers understand where a product was produced or manufactured. Essentially, a trademark lets consumers know who made the product. From a brand owner’s perspective, it separates the services or products from competitors. In turn, consumers are assured that a product they purchase is what they need. Based on reputation, brands convey the following qualities:
If consumers like what a certain brand represents and have bought it previously, there is a chance they will choose that brand instead of a competitor. Consumers tend to buy a brand for the first time if it has a good reputation or if celebrities or friends use the product.
Brands also allow consumers to develop certain expectations of a product. Moreover, consumers expect a certain consistent quality for a product, and they expect that same quality for new products sold under the same name.
For instance, customers expect new products sold under BMW to be the same reliability and quality as previous models. Consumers associate brands with certain price levels as well, including performance standards. If we examine watch brands such as Timex and Rolex, Timex is associated with durability and low prices, while Rolex gets equated with value and high performance. Many businesses and consumers also rely on UPS for shipping needs because the company has developed a stellar reputation of adding value to organizations through reliability and customer care.
When businesses and consumers fall into the habit of purchasing particular brands, they buy them consistently over a period of time. This also reduces the promotional time needed to obtain additional sales in the future while ensuring brand loyalty. Brands usually pass through various stages of brand loyalty, which is customer allegiance to a certain brand.
If you need help with a brand license, post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies