Skip to main content

license agreement

License Your Business System For Extra Income

By Business Contracts, Business Lawyer

When you’ve got a proven system for running a profitable company, it often makes sense to license that business system to others.

One of the most popular methods of doing this is to license geographically to third parties who won’t directly compete with you. Depending upon the size of your customer market, that can mean a different city, county, state/province, or even another country.

From a financial standpoint, this can be structured a variety of ways. For example, it could be a single flat fee up front, an annual license fee, a percentage of the licensee’s revenues, or a hybrid combination.

It’s important to note that licensing your business system the same thing as franchising. Chances are your licensee with be operating under a different business name and have a lot more flexibility on how to run a similar business.

With franchising, on the other hand, the franchisee is using the same business name and you as the franchisor have a lot of control over how the franchisee runs the business. And there are alot more laws and regulations you have to comply with when franchising.

If you need legal help licensing your business system, set up a phone consultation with Business Attorney Mike Young.

Products Licensing: How To Profit From It

By Business Contracts, Business Lawyer

Whether you sell products or services, you can make additional revenue by products licensing.

If you sell products, find complementary products available from third parties and license the right to sell them to your customers.

Depending upon the price point, a third-party product that you license can serve as an upsell, cross-sell, entry level product for your own product(s), or even be bundled with your products and sold together.

Of course, you can also license your products to be sold by others. Whether you receive a flat $XX per sale, a percentage of the sale, or some other revenue, it’s an easy way to generate additional cash flow while the third party handles the marketing and sales for you to their prospects and existing customers.

What if you only sell services? Chances are there are products that fit within your niche that can be licensed to sell.

Naturally, whether you’re the licensor or the licensee, the product license must make sense, i.e. be a natural fit for the licensee’s customers.

An experienced business lawyer can help you put together the right type of licensing and distribution agreement for what you plan to do that helps you maximizes profits while minimizing the legal risks.

Product Licensing Essentials: What You Need To Know

By Business Contracts, Business Lawyer

Product Licensing EssentialsWhen you’re considering product licensing, there are some fundamental issues you need to address.

As a preliminary matter, you need to determine if you’re really wanting to license a product, a trademark, or both?

Product Licensing Versus Trademark Licensing

Product licensing means one party (the “licensor) is licensing its product to another party (the “licensee”) to use or sell to others.

As a hypothetical example, The Coca-Cola Company* could license its cola soda to a licensee in another country to manufacture, distribute as a wholesaler, and/or sell at retail.

The cola would be the product being licensed. This type of product could be private labeled under licensee’s own brand name for the soft drink.

Related Article: Licensing Agreements – How To License Products In 3 Easy Steps

However, the company could also license its brand Coca-Cola® for the licensee to brand the soda. This would be trademark licensing.

In many cases, a prospective licensee only wants to license the trademark, not the product. For example, a manufacturer of stuffed polar bear toys might license the right to add a red hat with white script letters that read “Coca-Cola” to each toy bear. In this case, it’s the trademark being licensed (Coca-Cola® brand), not the product (toy polar bears with hats).

Scope of License

Whether you’re licensing product, trademark, or both, the scope of the license is important.

For example, if you want to only license a mark and don’t want a competitor to place the same mark on its similar product, you’ll want to negotiate an exclusive license to use the brand for that kind of product. Of course, you’ll likely to pay a higher licensing fee for such exclusivity.

On the flip side, if you’re the licensor, you’ll want to limit the scope of the license as much as possible so that you retain the ability to license the mark to others for additional revenues when it makes sense to do so. The terms and conditions that trigger license revocability are also important.

Where To Get A Product License Agreement

If you’re dealing with a large corporation as licensor, chances are they have boilerplate take-it-or-leave-it product licensing agreements that heavily favor the licensor. You will have little or no room to negotiate any of the terms and conditions except perhaps price and how long the license will last.

On the other hand, if you’re dealing with a small or medium-size company as licensor, it makes sense to have an experienced business contracts attorney prepare the license agreement with terms and conditions that are favorable to you.

Similarly, if you’re just starting out licensing your products or marks to others, a reputable business transactions attorney can prepare licensing agreements that are customized to favor you as the licensor.

* References to the marks of The Coca-Cola Company are made solely for educational purposes using hypothetical examples. No relationship exists between this law firm and the company. No claims are made with respect to the marks owned by the company, including but not limited to, the terms and conditions (if any) the company may license its products or brands to third parties.

Breach of Contract: Is Jay Z Getting a Bad Rap?

By Business Contracts, Business Lawyer
breach of contract rapper

What you can learn from Rapper Jay Z’s alleged breach of contract

As a Dallas business lawyer, I find valuable lessons in breach of contract lawsuits involving sports and entertainment stars. Today’s example is Rapper Jay Z’s dispute with a Long Island perfume vendor that’s ended up in a New York state court lawsuit.

According to news reports, Jay Z (a.k.a. Shawn Carter) may have violated a licensing deal to promote “Gold Jay Z” perfume. Among other things, he was allegedly compensated with a total of 1.1 million in company stock and stock warrants.

However, the vendor says Jay Z didn’t honor his contractual obligations to promote the fragrance to the public, such as mentions in social media and participating in interviews about the product.

Even if you’re rich as a successful rapper, the perfume company’s demands in court are enough to keep you awake at night wondering how to pay if you end up losing — $18 million in alleged damages, a demand for punitive damages, and other remedies.

So, what’s are the lessons to learn from this licensing deal gone bad?

1. Due Diligence

Whether it is a licensing deal or another contract that’s important to your company, performing due diligence on the other party is essential.

A simple Google search for “Jay Z lawsuit” would have revealed that the rapper has been involved in multiple lawsuits, including claims for breach of contract. Regardless of the merits of such claims, a litigation track record is a warning sign that you should prepare to end up in court if things go south…and use that factor to help you decide whether or not to go forward with the deal.

In contrast, if you were considering doing a business deal with NBA Hall of Famer Michael Jordan, due diligence would reveal that his litigation typically involves misuse of his name in advertising without compensation (i.e. someone wrongfully profited using his name without a license to do so). And when he’s donated the damages awarded to charity, it’s an indication that Jordan’s primary interest is in protecting his brand.

On the other hand, you’d also discover that Michael Jordan does not “do deals for anything less than $10 million.” That piece of information might deter you from approaching him to star in commercials for your company’s products or services.

2. Clarity Reduces Breach of Contract Risks

Without having the actual agreement to review, it’s unclear what was said (or left unsaid) about Jay Z’s obligation to promote the perfume. However, simple clear instructions in a contract for each party eliminates many misunderstandings that lead to lawsuits.

If I were the business attorney that prepared this licensing deal, I would have encouraged my client to insist on specific action items to be taken by the rap musician to market the fragrance.

For example, promotion in social media would have included specific identification of the media platforms (e.g. Facebook, Twitter, Google+, Pinterest), a minimum number of promotions for each platform, and ideally a timetable for such activities. If necessary, the business agreement would have provided for the company to create the content to be distributed by Jay Z in his social media accounts so that one of his assistants could simply copy-and-paste the material into the platforms for distribution.

If Jay Z was supposed to do interviews as part of the marketing campaign, the licensing agreement would ideally describe each media outlet conducting the interviews and set a base number of interviews as being acceptable.

3. Performance-Based Compensation

As with any business deal, it’s rarely a good idea to give the other party on the front end what he wants and then hope for performance to occur later.

The perfume seller could have tied the award of stock and stock warrants to specific measurable marketing and advertising activities to be done by Jay Z. For example, for every 10 tweets about the fragrance, the rapper would receive XX shares in the company. There could even be a bonus structure in place where Jay Z received additional compensation by exceeding the minimum promotional requirements and/or when perfume sales met certain targets.

No matter the type of deal, your business lawyer can follow these tips to help you get what you want without suing for breach of contract for damages.

Licensing Agreements: How To License Products In 3 Easy Steps

By Business Contracts, Business Lawyer

licensing agreementsWhen you use licensing agreements, you can get others to sell your products for you, deal with the related sales taxes and paperwork, and pay you a percentage of each sale made (sometimes called a “royalty” or “licensing fee”).

Here are three simple steps to setting up a licensing program for your products.

Step 1 – Identify the markets where your products already sell and potential markets you haven’t tapped.

Step 2 – Approach key players in those markets about becoming licensees. If you don’t have a pre-existing relationship with these prospective licensees, you may want to consider sending a personalized snail mail letter and make a follow-up telephone call instead of sending a blind email that could be treated by recipients as spam.

Step 3 – Have your business contracts lawyer prepare a licensing agreement that covers all of the key terms, including what’s being sold (e.g. private labeling rights), what you get paid on each sale, etc.

Related Article – 7 Keys To Picking The Right Internet Lawyer For Your Business

If you’re offering the same terms to all licensees, you can have a licensing contract template prepared to use with multiple licensees. For unique licensing arrangements, your Internet attorney can customize the template as-needed.

What about using an affiliate program instead of licensing agreements?

You can actually do both.

Nothing prevents you from having an Internet affiliate program and also licensing your products to others to sell.

However, it’s a time-consuming pain in the butt to run an online affiliate program where you pay commissions on sales driven by your affiliates. Even if you can afford to pay an affiliate manager, chances are Internet sales taxes and other paperwork associated with operating such a program is a major time suck.

Related Article: How To Grow Your Online Business By Licensing Offline Brands

You can even let your licensees run affiliate programs for your products and pay a cut of their own profits to their affiliates rather than having your own affiliate program.

What if you don’t have any products to license?

Find an ecommerce business that has products you want to sell and approach the owner about becoming a licensee. Have your Internet lawyer prepare a license agreement that favors you as the licensee.