What To Include In A Licensing Agreement

License Scope/Grant Clause: 

A licensing agreement assigns limited use rights for the intellectual property to the licensee. This means that the licensor does not give up all of the rights entitled to the intellectual property owner, and must clearly outline what the licensee can do legally with the intellectual property. Thus, you will need to make sure you explain what trade marks are allowed to be used on what specific products within a particular territory. 


Rights To Modify: 

This section will include if the licensee will have the rights to modify the intellectual property at all (such as adding to a code).  (as well as who gets the intellectual property rights of the modified product), transfer and sublicense rights, rights to source code, etc.



The agreement must cover if the licensee is being granted a license on an exclusive, non-exclusive, or sole basis. An exclusive license means that only the licensee has the rights to use the trademarks (and consequentially, you are not allowed to license it out to anyone else). On the other hand, a nonexclusive license allows the licensee to use the trademark and you may continue to use the mark/license it as well. A sole license means that both the licensor and the licensee have rights to use the mark, but prohibits anyone else from being able to. Keep in mind that if you clearly define the territory within the agreement, you may be able to grant several exclusive rights to different areas.


Revenue From Product: 

This is an important clause to include if you expect the licensee to make a substantial amount of money through the use of your intellectual property. As the licensor, you must decide how the payment structure will look like -Is it a one-time licensing fee? Is it a monthly lease payment? Is there a royalty involved? Be sure that you consider the cost of ongoing maintenance and technical support that you will provide. Many agreements also include a minimum guaranteed royalty or target sales section, which requires the licensee to achieve minimum target sales or to pay a minimum amount. 


Other Things To Include:

The term, or how long the licensee has the rights, prohibited use, warranties, limitations on liability, support, nondisclosure or confidentiality, indemnity for infringement, and contract termination. Essentially, there are a lot of moving parts to this, so it’s always a good idea to at least consult an attorney when drafting a licensing agreement.


If you found this article helpful, consider reading Copyright FAQ and Trademark FAQ.

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Revised: April 6, 2016, 8:33 p.m.
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