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Creating and enforcing licensing agreements

May 7, 2021 | Intellectual Property

Licensing agreements allow businesses to expand their offerings and reach in the market. However, they – like all business contracts – can trigger legal disputes when parties contest them or require court action to enforce them.

If you wish to avoid these situations, you can take the following steps when you are drafting or seeking to enforce them.

Elements of a solid licensing agreement

Licensing agreements are crucial for many businesses, whether they want to sell products using images owned by another party or be the exclusive streaming source for certain movies.

While every agreement will be unique to the terms and parties involved, several components will likely appear in any standard licensing agreement.

  • Details of the intellectual property to be licensed
  • Durations for the agreement and when the licensee can use the material
  • Methods and frequency of quality control
  • Geographic restrictions
  • Royalties on sales
  • Licensing fees
  • Restrictions on use

These are critical elements of a licensing agreement that clearly lays out expectations and protections for both the licensee and licensor.

Mistakes to avoid in licensing agreements

Because these agreements are often highly technical and complex, legal guidance is crucial when drafting or enforcing them. Attempting to navigate these matters without attorneys can be a costly mistake.

Another mistake that parties should avoid is entering an agreement with a party that does not share the same goals or ideals. In these situations, parties could be locked in a relationship that hurts their brand.

It can also be problematic to agree to overly restrictive or specific terms that are too complicated to fulfill.

Further, neglecting to enforce the terms of a licensing agreement can be a costly mistake. If you stipulate that there will be regular quality checks or that a licensee must not use an image to sell specific products, be sure that both parties comply with these terms to prevent avoidable damage and losses.

These and other missteps could ultimately hurt a business, so it is crucial to avoid them by seeking legal guidance when drafting, signing and enforcing a licensing agreement.

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