Licensing your intellectual property can be an efficient and profitable way for your business to build upon its brand. After all, allowing a third party to use your intellectual property is a great way of expanding your brand into new geographic areas that you may not otherwise have the capacity to reach. However, intellectual property laws are complex, and if you are not careful, licensing your brand to others can place your business reputation in jeopardy. Here are a few important points to keep in mind as you consider licensing your brand.
1. Get to know the prospective licensee.
Perhaps the most important thing you can do is to get to know your prospective “licensee” before entering into a formal agreement. Remember, the licensee will be viewed by the public as an extension of your brand, and their actions may impact your brand both positively and negatively. To this end, you should conduct a thorough investigation into all prospective licensees. Among other things, you should vet the prospective licensee’s business experience to ensure that the licensee is capable of meeting your expectations. You should also consider running a background check to identify any past or pending legal matters involving the licensee business and its owners.
2. Be sure you have the right to grant the license.
Prior to granting a license in your intellectual property to a third party, you need to make sure that you have the right and authority to license the brand in the first place. For example, if you were to license the use of a logo that infringes on a third-party’s intellectual property, you could end up facing liability from both the prospective licensee and the third party. Therefore, you should take all steps necessary to confirm your rights to license the brand, which may include registering your trademarks, logos, and tradenames with the United States Patent and Trademark Office and similar state agencies.
3. Consider how the mark may be used.
The agreement that you enter into with the licensee will include certain restrictions on the use of your brand (or “mark”) by the licensee. You will need to consider limits on both how the mark is used, and also where. For example, use of your mark on a t-shirt could be different from using it on a cup or a poster. And while physical space is relatively easy to define, control in cyberspace may not be as easy. You will need to be careful in defining the scope of the license so that you, the licensee, and other potential licensees are aware of their rights.
4. Carefully draft your licensing agreement.
Once the terms of your agreement with the licensee are decided, your agreement will need to be written in a formal “License Agreement.” The License Agreement will be the foundation of your relationship with the licensee and will memorialize the legal and business terms of your arrangement. Terms may include license fees, audits, permitted and restricted uses, the duration of rights, and more. A License Agreement needs to be carefully drafted in order to ensure that your rights are retained without causing any unintended consequences.
These are just a few points that a brand owner should consider when deciding to license its brand. Michael Weiland is an attorney in the Business Transactions and Real Estate practice group at Davis, Agnor, Rapaport & Skalny, LLC. For questions about this article or other business related matters, please contact Michael at 410.995.5800