All you need to know about standard terms in a license agreement – Part 3

All you need to know about standard terms in a license agreement – Part 2

All you need to know about standard terms in a license agreement – Part I

Carrying on with what makes a ‘marketplace’ for licensing, it can be considered likewise from the licensee’s side: The licensor is ‘renting’ the awareness & popularity that a certain mark or brand has to help it sell products.  Building a brand, and building consumer awareness around a brand, is a very costly, risky and time-consuming undertaking.

In the last post, I went over the overall structure of a standard licensing agreement.  I’d like to write here about the topline rationale behind licensing – why and how the licensing model is a viable business approach for both licensors and licensees – in essence, what is the basis & parameters of the ‘marketplace’ for licensing.

The best way to get a big picture understanding of how licensing works is to use the analogy of real estate.

Let’s say you have a property company which owns a condo building, and is renting the units out to tenants. A real estate agent has been hired by the condo owner to find tenants. When the agent finds a tenant, that tenant will sign a contract for one or two years, agreeing to a certain financial arrangement between the tenant and the landlord, as well as how the condo unit can, and cannot, be used. The agent who brokered the deal is paid a commission by the landlord (typically), which is generally a percentage of the financial arrangement that has been agreed to by the tenant and landlord.