Tips for Drafting an Effective Licensing Agreement

Tips for Drafting an Effective Licensing AgreementIf you have property that you want to license to other parties, it is essential that you have a solid written license agreement. This doesn’t mean the contract must be lengthy or complex. In fact, contracts that are straightforward are usually more effective, as long as they are enforceable.

Below are a few of the main points you want to cover in a licensing agreement.

Scope of License

The scope of license must be set forth very clearly. You are only granting limited rights to the other party since you are retaining ultimate ownership rights, so the boundaries must be clear. Of course, you don’t want to be too restricting because you want others to want to use your product.

The scope of license must specify whether it is an exclusive or nonexclusive license. Most licenses are nonexclusive, which means you can sell the right to use your product to multiple parties.

Payment for License

A license agreement must set forth the terms that control the revenue streams by the licensed product. This includes either a one-time license fee, recurring payments or royalties, or both. A license agreement may also include ongoing maintenance fees.

Other Terms

There are many other terms that must be included in a license agreement, including:

  • Date the license expires
  • Ability of the licensee to alter or combine with other products
  • Detail of any prohibited uses
  • Ability of licensee to transfer or sub-license rights
  • Warranties, if any
  • Licensee’s rights to the source code, if any
  • Procedures for acceptance, testing and training
  • Any limitations on the licensor’s liability
  • Confidentiality and non-disclosure provisions
  • Indemnity
  • Support services
  • Remedies and enforcement of same
  • Ability to terminate agreement

There are a variety of issues that must be considered when creating a license agreement. Let us help. If you are interested in learning more about licensing agreements or how we can assist you with your business-related needs, contact the knowledgeable lawyers at The Swenson Law Firm to schedule an appointment.

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