What is a Licensing Agreement?
With the advent of rapid commercialisation, one of the means of revenue generation for business entities or individuals is through licensing their intellectual property. Through licensing agreements, licensors provide the licensee with appropriate rights to use their trademarks, copyrights or patents, as the case may be. In consideration, the licensee pays a stipulated royalty fee to the licensor.
In the technology industry, licensing agreements are widely used in the form of cross-licensing agreements, which facilitate the simultaneous grant of licenses of certain intellectual property between two or more parties. Some commonly used licensing agreements in the entertainment industry include copyright license agreements, character and entertainment license agreements, and celebrity licensing.
For instance, one of the major revenue sources of Marvel Studios is through licensing agreements with brands like Hasbro (for toys) and Square Enix[1] (for gaming). Marvel has granted the rights to use its characters and trademarks in manufacturing and selling toys and developing online games. The 2013 movie The Hulk, directed by Ang Lee, did not do well in terms of box-office numbers. However, the sales of the toy called "Hulk Hands" is valued at a whopping US$100 million.[2] This is testament to the fact that licensing agreements are a means of not only protecting one's intellectual property but also an outstanding business strategy.
Through licensing agreements, businesses can generate revenue over an existing and commercially functioning piece of intellectual property. It is an enterprising move which yields various monetary and strategic benefits.
Although they come with their fair share of risks, a meticulously drafted licensing agreement would largely help in mitigating the risks involved with such a venture.
[1] marvel.com, on Marvel's licensing partnerships for games. [2] wipo.int/wipo_magazine, on the commercial value of licensed merchandise.
Disclaimer: The content of this article is intended to provide general guidance on the subject matter. Specialist advice should be sought about your specific circumstances.