A Lowdown on Drafting a Licensing Agreement

Standardized Legal Documents A Lowdown on Drafting a Licensing Agreement

Understanding a Licensing Agreement

Legal documents can be confusing if you’re not a lawyer, but it doesn’t have to be this way. We have created a vast knowledge base to break down numerous contracts and agreements in layman’s terms and provide tips on writing them.

We’ll help you understand the ins and outs of a licensing agreement and create all kinds of contracts!


What Is a License Agreement?

A licensing agreement is a legally-binding document between two parties. By this contract, one party (the licensor) that owns certain assets allows the other party (the licensee) to manufacture a product or use patented technology.

Important factors that come into play in defining a licensing agreement are the following:

  1. Exclusivity:
    • Exclusive—The licensee is the only one who has the rights to a property
    • Non-exclusive—More than one licensee may be involved
    • Sole—There is only one licensee, but in this case, the licensor can also keep using the property
  2. Territory—Designating a territory where a licensee is allowed to make and sell a product
  3. Duration:
    • Perpetual—The licensee can use the property indefinitely
    • Term—The licensee can pay a one-time fee that covers an agreed-upon term or pay per use
  4. Payment—The licensor gets royalties from the licensee. The payment methods and terms differ (e.g., paying a percentage of revenue or a flat-rate)
  5. Sub-agreements—e.g., a non-disclosure and a non-compete agreement

Types of Licensing Agreements

You should draw up different types of licensing agreements depending on the type of property. Check out the most common types in the table below:

Type of a Licensing Agreement Brief Explanation

Patent

  • It typically involves science and innovation
  • The licensor gives rights to the licensee to manufacture, distribute, sell, and use a patented product

Trademark

  • It can be used for licensing logos, slogans, and brand names
  • It outlines how the licensee will use a trademark

Trade secret

  • This type entails a non-disclosure sub-agreement
  • The licensee agrees to certain terms of using the licensor’s trade secrets without disclosing them (e.g., Coca Cola’s or KFC’s formulas)

Copyright

  • Copyright agreements are common for art, movies, songs, and characters
  • The licensee obtains the right to reproduce and sell a copyrighted product

Important Aspects of a Product Licensing Agreement

Before entering a licensing agreement, whether you’re the licensor or the licensee, you need to take a few details into account, including:

  • Checking government regulations
  • Doing due diligence, i.e., researching the other party
  • Familiarizing yourself with taxes
  • Determining payment details
  • Thinking ahead in terms of potential ownership disputes
  • Understanding every clause of the agreement

What Are Some Licensing Agreement Examples?

You may not even be aware of how many licensing agreement examples you’re already familiar with. Actors, sports teams, record labels, and film production companies usually need to sign licensing agreements in the following situations:

  • Actors enter licensing agreements to allow toy companies to use their likeness and manufacture dolls and action figures
  • Sports teams typically sell trademark licenses so that companies may use their names or logos
  • Musicians sign licensing agreements with record labels that allow them to duplicate and release records
  • Movie companies can sell licenses to companies, allowing them to create trademarked products based on movie characters

Real-life examples include McDonald’s having a licensing agreement with Disney to use Disney characters as Happy Meal toys.

Can I Get a License Agreement Template and Draw It Up by Myself?

While there are myriads of contract templates on the internet, they’re not always reliable or applicable to your specific situation. You can comb through different license agreement samples online and get an idea of what your agreement should look like, but it’s best to tailor it to your own needs.

Use DoNotPay To Draft Different Legal Documents

Aside from the licensing agreement, you may need various sub-agreements or entirely separate contracts we can assist you in creating. With our Legal Documents feature, you can generate an unlimited number of agreements.

Follow these instructions to start creating:

  1. Visit DoNotPay in a web browser
  2. Enter the type of legal document you want to draw up
  3. Answer a few questions

Your answers will help us make a unique and solid contract. As soon as you provide us with the relevant info, our app will let you obtain the document.

The next step for you and the involved parties is to review and sign it.

What Agreements Can I Create With DoNotPay’s Help?

DoNotPay—the world’s first robot lawyer—can come in handy in numerous situations that require a legal document. Not only can we create an agreement in a matter of minutes, but we can also provide tips and guidelines. Our database grows every day, and it includes:

Real Estate Business Other
  • Quitclaim deed
  • Estoppel certificate
  • Intent to purchase real estate
  • Lease agreement

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