A licensing agreement is an arrangement where one party grants another party rights to produce or sell goods, or to apply a copyright, trademark, or patent that they own. The party granting the rights is called the “licensor”, and the party receiving the rights is called the “licensee”. The transfer of license rights is usually done for a monetary fee, where the payments are collected in the form of royalties.
A licensing agreement usually covers many different aspects including:
- The scope of the use of rights, including geographic restrictions and exclusivity of usage
- Financial arrangements such as royalty rates and schedules, sales terms, profits, and interest
- Marketing terms, including dates, length of the contract, and options for renewal
- Various clauses like non-compete clauses and arbitration clauses
Since a licensing agreement is basically a contract, the parties can also include many other different provisions as needed, depending on the subject matter of the license. These will be enforceable so long as they are not illegal and the parties fully agree to the terms in the licensing agreement.
Licensing agreements are contracts and are governed by various contract and business laws. As such, enforcing a licensing agreement can involve various contract remedies. Violations of terms contained in a licensing agreement may result in the following remedies:
- Monetary damages: The injured party may sue the breaching party to recover losses associated with the breach. For example, they may profits that were lost due to copyright infringement
- Injunction and other Equitable Remedies: A common remedy is for the court to issue an injunction instructing the breaching party to stop the infringing activity
- Remedies prescribed by the contract itself: The parties may also include clauses in the licensing agreement which spell out how the parties will resolve any disputes. For example, they may sign an arbitration clause stating that the parties will resolve disputes through arbitration instead of litigation
Enforcing a licensing agreement becomes much easier when the contract itself is well-written. If the parties clearly understand their rights and duties according to the licensing agreement, it can help prevent disputes in the long run.
Many types of licensing agreements also involve intellectual property laws such those governing infringement of copyrights, trademarks, brand names, and patents. Infringement-related violations are subject to criminal law, not just private civil lawsuits.
Criminal penalties may include heavy fines and even jail time. Some jurisdictions also require the seizure of goods that were produced or distributed through infringement.
Licensing agreements are a vital part of many business enterprises. Enforcing a licensing agreement can sometimes be complicated. You may wish to hire a qualified business lawyer in your area if you need help getting your agreement enforced in court. An attorney can also assist you during the drafting and negotiation stages, so that you can be prepared in the event of a dispute.