A licensing agreement is a written contract between two parties, in which one landowner allows another party to use that property under a number of parameters. A licensing agreement or licensing agreement usually involves a licensee and a licensee. Pay attention to definitions. Make sure the product or process is completely and clearly described so that there is no misunderstanding about what is allowed. 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. Exclusive and territory. The licensee is granted the exclusive right to manufacture and sell the product in a given territory. The licensee agrees that others are not allowed to sell the product in this area. This part of the agreement is usually accompanied by a clause. Another common element of licensing agreements is the party that retains control over copyrights, patents or trademarks. Many contracts also contain a provision on territorial rights or distribution in different parts of the country or the world.
In addition to the various clauses included in the licensee protection agreements, some licensees may add their own requirements. They may insist on the guarantee that the licensee owns, for example, the property`s property rights, or they may insert a clause prohibiting the licensee from directly competing with the property granted in certain markets. The bargaining power of both parties to a licensing agreement often depends on the nature of the product. For example, a film studio that would grant the image of a popular superhero to an action figure maker could have considerable bargaining power in this negotiation, as the manufacturer will likely benefit from such an agreement. The film studio therefore has the lever to take its business elsewhere if the manufacturer has cold feet. Confidentiality agreement. Both parties agree not to disclose trade secrets. Do your due diligence before the agreement. Both parties should carefully consider the other party. Check business credits and continuous management. Ask for a degree. Visit the offices and production sites of the other company.