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Product licensing is a business arrangement in which a company (the licensor) grants another party (the licensee) the right to use, manufacture, or sell its product, technology, or intellectual property in exchange for royalties, fees, or other forms of compensation.
Why choose to license your product?
As an entrepreneur, product licensing is relevant to you in two ways: First — ensuring that the products are licensed correctly — this means avoiding piracy and making sure you adhere to the terms of open-source software licenses to protect your business both legally and ethically. Secondly, consider licensing your own product. This allows you to safeguard your own intellectual property rights and prevents unauthorized use or duplication of the product.
Pros of licensing your product:
- The cost of licensing a product is lower than starting a business/organization
- You will not need to market your product or service
- Your product can become a lucrative source of income
You can also refer to this example where St. John's Athletics and The Brandr Group (TBG) launched a group licensing agreement available to all Red Storm student-athletes who represent the University's 17 sports teams. St. John's will not offer its student-athletes the opportunity to combine their Name, Image and Likeness (NIL) with official trademarks and logos as part of the group licensing program.
How to license your product
- Identify your licensing objectives: It is important to know what you wish to achieve with the license (e.g., generate revenue, expand market reach, or protect intellectual property). This will shape the terms and conditions of the license.
- Understand your intellectual property: It is important to know what makes your product unique. It is also important to understand if your product is protected by patents, copyrights, trademarks, or trade secrets. Ensure your IP is registered and legally protected.
- Choose the right license type: Select the most appropriate licensing model (e.g., exclusive, non-exclusive, open source, or royalty-based) based on your goals.
- Draft a licensing agreement: Create a comprehensive legal document that will outline the terms of use, restrictions, duration, territory, royalty rates, and any other conditions. You can work with an attorney that specializes in IP law to ensure all bases are covered.
- Find and negotiate with potential licensees: Identify companies or individuals who could benefit from licensing your product. You can negotiate terms that align with your objectives while meeting the licensee's needs.
- Manage and monitor your licensees: It is important to regularly track and enforce the terms of your licensing agreements, including collecting royalties, monitoring compliance, and protecting your IP rights.
Types of product licensing
There are various types of product licenses you can choose from based on your set of goals and requirements. These are:
Brand License:
A brand license gives the licensee the right to sell or distribute goods with your brand’s name. This could also be the organization or licensor’s brand logo.
Copyright License:
Copyright licensing allows the licensee of intellectual property rights to use a copyrighted item. A copyright license may be applicable for books, movies, musical recordings, artwork (including characters or images from animation or illustration), dance choreography, computer programs, and even buildings.
International License:
International licensing grants a foreign business or organization the right to manufacture or use a company’s product for its market.
Patent License:
A patent license grants a licensee access to an owner/holder’s patent for several purposes, such as manufacturing or distribution.
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