Because of the legal basis they have to cover, some licensing agreements are quite lengthy and documents complex. But most of these agreements cover the same fundamentals. These include the scope of the agreement, including restrictions on exclusivity or territories; financial aspects, such as necessary advances, royalties and royalty calculations; Guarantees for minimum sales Calendars with “on-the-market” dates, contract duration and renewal options; the lessor`s rights to quality monitoring and control, including procedures to follow; Minimum inventories that need to be maintained and returns and allowances. Start and end of the agreement. Say when the agreement will be reached and when it will end. Describe the possibility of a renegotiation and continuation of the agreement at the end of the agreement. Please consider the circumstances under which the agreement may expire before the expiry of the term. What happens to the possession of the product at the end (usually it is converted into owner)? Another important element of a licensing agreement defines the timing of the agreement. Many licensees insist on a strict marketing date for products that are granted to external manufacturers.
Finally, it is not in the licensee`s interest to license a company that never markets the product. The licensing agreement also contains provisions relating to the duration of the contract, renewal options and termination terms. A license is usually established by an explicit or tacit agreement. The licensee must approve the license, which can be shown in writing, or the licensees who accept their exercise. In addition, unlike many other contractual agreements, a license does not require consideration, a license can be established with or without it. In addition, the question of whether an agreement is considered a “licence” and not a tenancy clause depends on three essential characteristics of a licence: (1) a clause authorizing the licensee to revoke “as he sees fit”; (2) the maintenance of absolute control of the premises by the licensee; and (3) the provision to the licensee of all essential services necessary for the authorised use of the premises by the taker.  Licensing your company`s assets certainly has advantages, but be sure to take these factors into account when creating a licensing agreement: under a pure licensing agreement, the licensee can terminate the contract as it sees fit and for no reason, unless it is related to an interest or rendered irrevocable. An interest-related licence cannot be revoked by the licensee without liability and potential damage. In the event that a licence is related to an interest, the licensee must give the licensee a reasonable period of time to withdraw that interest from the property prior to termination. Since a licence does not confer any interest on the licensee, the licence is terminated in the event of the sale of the property and cannot be imposed on the new owners of that property.
In addition, the death of the licensee or licensee will terminate the contract. In May 2018, Nestlé and Starbucks entered into a $7.15 billion coffee licensing agreement. Nestlé (the licensee) has agreed to pay $7.15 billion in cash to Starbucks (the licensee) for exclusive rights to sell Starbucks products (single serving coffee, teas, beans, etc.) through Nestlé`s worldwide distribution network. In addition, Starbucks receives royalties from coffees and packaged teas sold by Nestlé. The issue of compensation is particularly important. Based on the ownership discussed in the license agreement, different payment models may be useful. The use of songs is usually offset by royalties, for example. In other words, the owner of the copyright to a song is paid for each time the song is played on the radio, in a bar or even by another group at a live event.