License Agreements

Contracts for the temporary use of a property in exchange for a license fee are known as Licensing Agreements. In other words, a License Contract, which is sometimes referred to as a License Agreement or Licensing Agreement, is a type of contract in which one party (the licensor) allows another party (the licensee) the authority to create, use, trade, and/or display the licensor’s protected material.

The creation and conclusion of a license agreement are not simple. So, you will need some legal advice. During the process you might face some obstacles and problems and a legal expert could minimize them with good foresight.

In this regard, Karimi & Associates Law Firm, with a team of experienced and expert lawyers in various legal fields, by providing specialized legal advice, accompanies and supports your interests in this process.


A licensing agreement is a legally binding, written contract between two parties that grants one party the right to utilize another party’s trademark, brand, or patent. A lot of new discoveries or technologies are commercialized through licensing agreements. Every license agreement has two parties: Licensor and Licensee.

Licensor is the provider of the Intellectual Property and the Licensee is the receiver of the Intellectual Property.

Global trade expands day by day and with this growth, there is more need for commercial tools and agreements. One of them is License agreements. License agreements aid new businesses to grow and to be known faster rather than building their own brand from scratch. Are there any other advantages? What about the disadvantages?  Let’s have a look at both the negative and positive aspects of License Agreements.

Advantages of Licensing Agreements

The first advantage is passive income; The owner has the chance to generate a consistent flow of passive income through licensing. Once the IP is created, all that remains is to sell licenses. You will profit if the licensees do, and these payments may continue uninterrupted for a length of time.

The next one is creating new business opportunities; The licensees are able to buy a business license and start to make money without spending a huge amount of money to start a business from scratch. Everything is ready, just enjoy it!

Entry to foreign markets, which is a big challenge to businesses by default could be easier with a license agreement because it allows the IP to cross borders. Let’s make it clear: Tariff barriers can be eliminated because a domestic company uses the IP in the same way that the licensor might do so domestically.

The greatest advantage is self-employment opportunities which are given by license agreements. Licensees have a better chance than going it alone of obtaining a monopoly over a good or service in a particular region.

Disadvantages of Licensing Agreements

But it is not all about the advantages. When you intend to enter into a license agreement, you should be aware of the cons. What they could be?

IP theft is the first one. The license agreement can increase IP theft opportunities. Because of the licensors’ little influence over the licensees’ operations, there will be additional potential for theft, piracy, and abuse.

As the license agreements grow, the market becomes more competitive as a result. Many licensors discover that their licensees eventually start to compete with them in their specific marketplaces. This leads to a challenging scenario since if IP is sold in the same manner, one firm or the other will suffer.

The reputation damage of both parties should not be underestimated. One of the relationship’s components, licensing, is susceptible to poor management, which can harm a brand’s reputation. If several licenses are made available, the reputation may suffer internationally, harming many enterprises that are not participating. Because of this, many license agreements include a list of best practices to adhere to, ensuring brand consistency throughout all license agreements.

For keeping the disadvantages and risks to a minimum, an experienced lawyer can assist you in determining the type of license agreement you require and the contents of that agreement.

Licensing Agreement Examples

One of the most famous and understandable examples of Iicense is about the movie characters.

For the purpose of creating action figures that may be sold on the market, a movie studio may grant a toy maker a copyright license for its characters from a well-known film. Another famous example is pharmaceutical companies;  In order to cut expenses, a pharmaceutical corporation might license a medicine patent to a third-party producer in a less expensive country.

Licensing vs. Franchising

There is an important point that should be considered when we talk about licensing agreements.

Both franchises and licenses are business contracts that allow for the sharing of specific brand elements in return for a price, but we should distinguish between Licensing and Franchise and investigate precisely, especially when we want to start a new business. Because of some similarities, wrong choices are made and it will have some serious consequences for new business owners. So, let us have a look at the differences between licensing and franchise:

Whereas a license agreement only applies to registered trademarks, a franchising agreement covers a company’s complete brand and operations. While licenses are more suited to product-based enterprises, franchises often work best for service-based ones. Compared to a franchisee, who will have their operations controlled by the franchise owner, a licensee has more autonomy over how they conduct their business (franchisor). But a franchisee will also get a lot of direction and instruction from the franchisor. To read more about franchises, you can check Franchise Agreement publication on our website.

Types of Licensing Agreement


Trademark Licensing

Trademark licenses enable owners to grant other parties access to their intellectual property. For commercial goods like apparel, iPhone covers, or food items, trademark owners most frequently provide licenses to use their marks.

Trade Secret Licensing

Being unregistered with the government, makes trade secrets special. Only their confidentiality provides protection for trade secrets. Non-disclosure agreements (NDAs) are frequently included in trade secret licensing agreements. According to NDAs, the person obtaining specific secret information is not permitted to disclose it to anyone. Coca-Cola and the recipe for KFC chicken are the most well-known examples.

Copyright Licensing

Similar to trademark licenses, agreements for copyright licensing are frequently utilized for consumer goods. They are also employed for distribution deals, such as those for films or musical compositions.

Patent Licensing

The legal contracts that a patent owner uses to provide another party permission to utilize their property are known as licensing agreements. They are typically the most intricate licensing types because of all the requirements for acquiring and preserving a patent.

What to include in your license contract?

Since License agreements nearly often result in the transfer of property ownership, a comprehensive License Agreement should include the following points:

  1. Details on whether the licensee is using the asset solely or sharing it with others.
  2. Information on royalties paid by the licensee to the licensor.
  3. Information about the geographic areas where the license is valid.
  4. Transmit information on the license, including whether it can be sold again.

So, it is not easy to draft a fully standard license agreement and a legal expert is the key! Licensing agreements are complicated and necessitate knowledge of regional standards. To conclude a perfect license agreement, you can contact Karimi & Associates Law Firm through our contact section and receive specialized legal advice in this field from our team of expert lawyers.

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