Unlike the sale of an asset, the licensor remains the final owner of the asset or methodology; the limited rights of use belonging to the Licensor are transferred, not the ownership. The alternative to a license is the actual sale of the asset to the buyer, but most licensors still want to be owners so that they can use the asset in the future or in other territories or applications. It is important for the licensee to acknowledge that, unlike full ownership, the license is only a set of rights that it receives with the ownership of the entire remaining licensor. There are many other methods to consolidate efforts to promote and sell a product or service, ranging from co-ownership of a single company to joint ventures (partnerships of two or more companies) to distribution and agent agreements. In most cases, a license is the preferred method by a person or organization that simply wants to have a completely passive role to receive royalties without being involved in day-to-day or even strategic marketing decisions. As one customer put it, ”I just want to sit down and cash my license checks.” Among the many types of business relationships encountered in the modern world of transactions is the concept of a licensing agreement, in which one party exercises another`s right to use a right, trade name, method or product, or other asset for mutual purposes in a commercial context. The natural or legal person granting the right is referred to as the ”Licensor”. The natural or legal person who receives the right is referred to as the ”Licensee”. License agreements limit the conditions under which one party may use another party`s property. Although the properties in question may include a variety of elements, including real estate and personal property, licensing agreements are most often used for intellectual property such as patents and trademarks, as well as copyrights for written materials and visual arts.
Licensing agreements cover a wide range of known situations. For example, a retailer may enter into an agreement with a professional sports team to develop, produce and sell products bearing the sports team logo. Or a small manufacturer licenses a large company`s proprietary production technology to gain a competitive advantage instead of having to spend time and money developing its own technology. Or a greeting card company could reach an agreement with a movie distributor to produce a series of greeting cards in the image of a popular animated character. But it`s rarely that simple, because the licensee`s activities are an issue that should be of great interest to any savvy licensor, as a poor or malfunctioning licensee can lead to the uselessness of a product or service that could have developed good cash flows, while other competing products dominate the field. In addition, most licensees need advice and assistance from the licensor, so inevitably requires more than ”cashing the cheques.” While many inventors dream of licensing their product to a multinational that simply pays a lot of money over time, the average license includes two relatively small companies that need to work together to ensure the success of the process. .