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Tips For Entering Into A Licensing Agreement

Originally Published In Shop-eat-surf

Licensing can be like jumping into cold water at 6 am – you’re hesitant to do it, but once you’re in the water and catch your first wave, you’re fine. Start-up brands and established brands are often unsure about the details and/or benefits of licensing. To some, licensing may help increase business beyond what they ever expected. To others, licensing can be your worst nightmare.

The first rule is to think of licensing as a marriage. Don’t get involved in a licensing deal with someone you hardly know, or with someone you don’t trust. Many licensing agreements fail because the parties did not share the same goals when the relationship was formed. Conflicts can be avoided by choosing the right partner at the outset.

Another critical aspect of licensing that is often overlooked is the plan. You need to have a licensing strategy. Too many companies go down the wrong path by not defining their core objectives through licensing. For example, allowing a licensee to mass produce certain products in the wrong markets with promises of substantial royalties may sound appealing at first, but it could ruin the brand’s core image and value in the long run.

Also, as with any agreement—know the terms; monitor performance; and diligently enforce your rights. It’s your brand and you need to protect it. You need to ensure that your intellectual property rights remain valid and protectable, which usually means completing proper registrations and establishing a portfolio. In addition, in the event of unforeseen risk or potential damage to your brand and/or your rights, you will need to know the potential triggers for termination of the relationship. Hopefully, the relationship is successful, but if not, you need to cancel and move on. In this respect, your licensing agreement should be thought of as your prenuptial agreement in a marriage.

Finally, licensing deals can be complex, sometimes overwhelming, and may take weeks or months to negotiate. For this process, you’ll want to consult a lawyer with experience in negotiating licensing agreements.