What is a license agreement?
A license agreement is a written contract between two parties, in which a landowner authorizes another party to use this property according to a specific set of parameters. A license agreement or license agreement generally involves a licensor and a licensee.
Understanding license agreements
License agreements define the conditions under which a party may use goods belonging to another party. Although the subject properties may include a multitude of items, including real estate and personal property, license agreements are most often used for intellectual property, such as patents and trademarks, as well as copyright. author for written materials and the visual arts.
License agreements are widely used for the commercialization of technologies.
In addition to detailing all parties involved, the license agreements detail how authorized parties can use the properties, including the following parameters:
- The geographic regions in which the property can be used.
- Time period parts are allocated to use the property.
- Exclusivity or non-exclusivity of a given arrangement.
- Terms of scaling, so that new royalty fees will be incurred if the property is reused a number of times. For example, a book publisher may enter into a license agreement with another party to use a work of art on hardcover editions of a book, but not on the covers of later editions of paperbacks. The publisher may also be prevented from using the artistic image in certain advertising campaigns.
Examples of license agreements
Examples of licenses can be found in many different industries. An example of a license agreement is an agreement between software copyright owners and a company, allowing it to use computer software for their daily business operations.
An example of a license agreement in the food service area would be when a McDonald’s franchisee has a license agreement with McDonald’s Corporation that allows them to use the company’s branded and marketing materials. And toy manufacturers regularly sign license agreements with movie studios, giving them the legal authority to produce figurines based on popular likenesses of movie characters.
Conclusion of a license agreement
The bargaining power of the two parties involved in a license agreement often depends on the nature of the product. For example, a movie studio that licenses a popular superhero to an action figure maker could have significant bargaining power in this negotiation, as the maker is likely to benefit enormously from such an arrangement. The film studio therefore has the power to take its business elsewhere if the manufacturer is cold in the eyes.
Those entering into a license agreement should consult a lawyer as there are complexities that can be difficult to grasp for those who do not have a thorough knowledge of intellectual property law.