There’s a well-known fashion designer who’s currently suing for breach of a licensing agreement because she alleges, among other things, that the licensee is hurting her brand by selling inferior merchandise.
Whether or not that’s true, the key takeaway from this lawsuit is that when it comes to protecting your brand as a licensor, your licensing agreement must contain specific terms and conditions that makes it difficult for the licensee to harm your service marks and trademarks through misconduct.
Important Brand Licensing Agreement Clauses
Some of the key provisions you may want to include in the contract are:
- Limit the scope of the license (e.g. term, geographic, revocable, nonexclusive, etc.);
- Choice of law and forum for resolving disputes (preferably your home territory, not the licensee’s);
- The ability to obtain injunctive and other equitable relief to protect your brand;
- Significant liquidated damages per violation;
- Alternative dispute resolution (mediation and arbitration) for most issues unrelated to protecting your intellectual property (IP);
- Award of attorneys’ fees and court costs to the prevailing party in a dispute (loser pays); and
- Confidentiality and non-disparagement clauses.
According to Texas Business Lawyer Mike Young, unequal bargaining power may become an issue when interpreting a license agreement because courts (particularly juries) are inclined to favor the underdog if one party is significantly larger than the other.
If you have all of the leverage (e.g. the licensee is a micropreneur), it’s important that your company’s attorney draft language that mitigates this disparity in bargaining power while protecting your interests so that there’s a perception of fairness when it comes to enforcement.
Using simple plain English will prevent many common disagreements as to your respective rights and obligations under a licensing agreement. When each party clearly knows what he is supposed to do, the odds increase that your deal will be profitable while protecting your brand too.
A good way to get what you want when licensing your brand is to have an experienced business transactional lawyer draft the contract based on your unique needs and use that draft as the starting point for all negotiations with prospective licensees.