Licensing Agent Definition: Everything You Need to Know
The licensing agent definition is a person who identifies possible licensees for the licensor's property, represents the property in trade shows.3 min read
The licensing agent definition is a person who identifies possible licensees for the licensor's property, represents the property in trade shows, and presents the property and proposals to licensees while negotiating contracts terms. For a licensor who doesn't want to do these tasks, hiring a licensing agent is a good idea.
A licensing agent also helps the licensor develop his properties to be more attractive for licensing. The agent will review the license by obtaining and reviewing samples of the licensed product and collecting royalties and other payments. Some licensors prefer to receive the samples and payments and pay a commission to the agent.
What Is Licensing?
Licensing allows your product to instantly enter the market that others spent decades to build. The return is a percentage of revenue from the products or services that have your license. Licensing fees per item sold are small but add up fast. You settle for a small percentage, but licensing revenue trends towards high-margin.
If you are interested in buying the licensing rights of a well-known name or product, there's a good probability of success. The licensing retail market is in the billions and gives you the interest in a borrowed name that is either well-known or unique, but it also takes marketing and selling to succeed. When used well, licensing can be an effective tool for profit.
There are three advantages that licensing offers. Licensing means you have something different than your competitors, and you are receiving a better margin for its uniqueness. It also means that the retailers you haven't been able to sell to will take a second look at what you have to offer. When this happens, it's much easier to sell the rest of your line.
Licensing Agent Role
- Agency goal: The agent contract should define what properties the agent is allowed to represent, along with the product lines and territorial areas in the contract.
- Exclusivity: Most agents will have exclusivity. In this kind of relationship, the agent is entitled to a commission from a license entered into during the relationship term.
- Control and ownership: A licensor should always keep property ownership and make final approval of license terms. A licensor should also sign all agreements and keep final approval rights. The agent should only be involved in communications and payments for the licensor.
- Commissions and expenses: The commission agents receive averages between 30 to 40 percent of gross licensing revenue and can go up to 50 percent. There may also be expenses for promotions, trade show, travel, and legal fees. The licensor may want the right to approve final expenses and impose a cap on total expenses.
- Term: Many agents require a minimum term of about two to three years in order to develop the property, find licensees, and receive royalties. The licensor can put terms in the contract to terminate with the agent if certain benchmarks aren't met.
- Renewal: The agent will want to be involved in a long-term agreement given the time and effort needed for the licensing program; therefore, he will want to renew the contract.
- Authority termination: According to the law of agency, the licensor can end the agent's role to act on behalf of the licensor. The licensor though, cannot deny commissions to the agent for deals entered into while the agreement was valid.
- End of agreement: The agent will not guarantee property success, and most will not enter an agreement where the agreement will be ended if success goals are not met. But licensor should have right to terminate for late or no royalty payments and entering agreements unknown to the licensor.
- After termination: After ending an agreement, post issues are often not given a second thought but can be a source for disputes when the relationship finishes. The agent will feel the future success of the licensor's program is because of his efforts, while the licensor will be hesitant to pay the agent who doesn't provide services anymore.
- Assignment: Usually the licensor enters into an agreement because the licensor is confident in the agent's skills in handling his account. If for some reason the agent stops working on behalf of the licensor, he should have the right to terminate the contract.
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