What is the Purpose of a License Company?

There are many reasons why companies might want to use a licensed company. It can help fill excess capacity, level seasonal highs, and increase profitability. In addition, a company may not have the resources to develop its new products, but through licensing, it can access other companies’ proven products and know-how and new markets. Listed below are some common reasons that companies use license companies. Hopefully, these reasons will help you decide if a licensed company makes sense for your business.

Benefits

Working with companies like The License Company offers many benefits to the licensor and the licensee. The licensor provides its subject matter expertise, such as marketing, supply chain management, or customs, while the licensee receives its libraries and databases. Both companies share advertising and promotion costs. As a result, both parties benefit from a common marketing and distribution network. And in many cases, licensors and licensees can work on a standard marketing and advertising campaign.

Although licensing can be a great way to commercialize your product, there are many pros and cons to choosing this route. For starters, a well-established licensing company has plenty of resources to market and sell its products. In addition, they have a proven track record in a competitive market. They also can leverage their experience and infrastructure to bring your product to market faster. Therefore, the benefits of licensing a product or service may far outweigh the drawbacks.

Disadvantages

Licensing has many advantages, including reduced risks and lower startup costs. The licensee is relieved of the cost and risk of developing new products, testing market acceptance, manufacturing, distribution, and selling. In addition, a licensee can take advantage of the experience of the product developer to break into a new market.

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First, a licensee’s market knowledge is usually better than the average licensor’s. Hence, a license can enable the licensing company to market its intellectual property effectively. It also gives the licensee the freedom to manage its business without having to make an upfront investment. This may lead to an increased risk of IP theft. But on the other hand, a licensing company is the best option for those who want to increase profits and brand image.

Common Elements of Licensing Agreements

There are many common elements of licensing agreements, including the control of the IP, the territorial rights of the licensee, and the distribution of the licensed property throughout different parts of the world. Some licensees add additional requirements to protect the licensor, such as requiring a guarantee of ownership and not competing with the licensed property. Listed below are some of the most common elements of licensing agreements. Once you’ve nailed these key elements, negotiating licensing agreements can be a breeze.

Territory. Licensors often insist on a deadline for releasing licensed products in the market. Otherwise, they might not give licenses to companies that will never market their product. Length of time and terms of renewal and termination are also common elements of licensing agreements. This is important because licensees are unlikely to want a licensing agreement too short. For example, if a licensee has exclusive rights to sell their product in the United States, the licensor may want the licensee to make the first sale in the country.