Lime Lingo: Licensing Agreement

Lime Lingo: Licensing Agreement

What is a Licensing Agreement?

Essentially, a licensing agreement is a legal contract between two people known as the licensor and the licensee. Typically, a licensing agreement permits the licensee the right to produce and sell goods, apply a brand name or trademark, use patented technology owned by the licensor, or allow the right to sell and produce intellectual property. Intellectual property is defined as: intangible property that is created in someone’s mind. Categories include art, literary works, music, inventions, designs, processes, and trademarks.

How Does Product Licensing Work?

Product licensing works most commonly by funding work that a company pays the designer royalties alone. In some instances, the designer will initiate a small up-front fee, plus the royalties, if the company licensing the product idea is mostly certain the product will sell well.

When a designer is ready to present information to potential licensees, it is important to have the following items:

  • Prepare Written Details
  • Market Research Data
  • Competitive Analysis
  • Patent Status
  • Production Cost Estimates
  • Testimonials
  • Product Specs
  • Drawings
  • Prototypes

Once the agreement is made to license the idea, something to think about is establishing a minimum guarantee clause. This basically says the manufacturer must sell a specified number of units every quarter or every year. If the manufacturer fails to do this, you have the right to license your idea to another manufacturer.

Why Do Design Companies Use Intellectual Property?

Intellectual property rights protect the shape, configuration, surface pattern, color or line when applied to a functional object that increases aesthetics and improves the visual appearance of the design. Industrial Design protection is a type of intellectual property right that gives the right to make, sell, and use products that represent the protected design but only to selected individuals. The type of protection you have secured (Utility Patent vs Design Patent) may protect your invention for a period of up to 20 years.

Not sure where to start?  Contact us to learn about how you can start developing your product!



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