A simple license agreement is the most basic form of a contract granting one party the right to use another party’s assets for commercial use. Licensing agreements usually transfer rights of usage for intellectual property, including trademarks, copyrights, patents, and even trade secrets. They are also common with software programs and other technology.

The two parties to a licensing agreement are identified as the Licensor, who owns the intellectual property being licensed, and the Licensee, the party to whom rights of use are being licensed. The licensing agreement is a common agreement that allows small businesses that do not have the manufacturing capability or market reach to let other businesses use their intellectual property while maintaining and protecting ownership rights.

A licensing agreement is also known as a:

  • Intellectual Property License Agreement
  • Copyright License Agreement
  • Know-How License Agreement
  • Patent License Agreement
  • Patent and Know-How License Agreement
  • Service Mark License Agreement
  • Trade Secret License Agreement
  • Trademark License Agreement
  • Trademark and Service Mark Agreement

If you are interested in licensing your intellectual property, the licensing agreement is an important legal document to protect your assets from misuse by another party. It is critical that you, as the licensor, accurately identify the licensee to guarantee that your rights are protected even if the licensee transfers their conveyed rights to a subsidiary or parent company without your specific consent.

When to Use a Licensing Agreement

You own intellectual property rights when you establish that you have created a unique design or invention or written a unique software application, musical composition or any written material which you can sell or license for profit. In the U.S., the U.S. Patent and Trademark Office or the Library of Congress grants these rights, depending upon the type of property. There are several instances that may arise where you would find a licensing agreement to be useful:

  • When granting complete right of use of your property to another individual or business entity through a or other type of contract.
  • When entering into an or non-exclusive agreement with another business.
  • When granting rights of use only in a particular geographic area.
  • When establishing for use of the property.
  • When licensing to another party.

A licensing agreement can contain complex provisions of usage or can simply outline the compensation that you desire from another party to use your property. The important element of the contract is that you are only giving the other party the right to use your property and that all rights of ownership remain with you.

Elements of a Licensing Agreement

Regardless of whether you are licensing your rights to others for trademark images, for written content as might be used in marketing collateral or training materials, or if you have developed technology used in point-of-sale systems or inventory tracking, the basic components of the agreement are the same. Basic elements include:

  • As complete a description of the intellectual property being licensed as possible, which could include trademark and patent serial numbers, titles of written or recorded works, and other unique identifying features of the property.
  • Why the property is being licensed.
  • Where the property can be used.
  • Duration of the agreement because most (but not all) licensing agreements are only for a specific time period after which they elapse or can be renewed.
  • Renewal terms, if the agreement can be renewed.
  • Amount and method of payment.
  • Limitations on the way your property can be used by another party that lets you impose some control over your property.

A licensing agreement identifies the following:

  • Licensor – this would be you as the owner of the property.
  • Licensee – you clearly state the party that you are granting usage rights to.
  • The intellectual property – you provide whether the property is a trademark, copyright, patent, trade secret, or technology.
  • Compensation – state how much the party will pay you to use your property.
  • Term of usage – provide the length of time over which you are granting the rights to the other party.

A licensing agreement allows you to set the terms and ways your valuable intellectual property can be used by someone else. It is suggested that you contact an attorney experienced in intellectual law before entering into an agreement with another party because you want to make sure you will not be taken advantage of and get the maximum amount due for your creative works.

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