Licensing: Terms And Conditions

The major components of a typical licensing agreement are:

1. The Product Description - describing the product and affirming the Licensor's ownership and right to convey.
2. Grant - wherein the Licensor (inventor/product developer/owner) grants certain rights to the Licensee. The grant typically specifies both the territory (ex. Worldwide, North America, Europe, east of the Mississippi, Florida) and the right granted (to make, to use and/or sell).In some situations, one company may be given a right to manufacture and another given the right to market.
3. Consideration - what upfront monies will be paid and the ongoing royalty rate payable to the Licensor.
4. Term - the length of the agreement, which could be for as little as 3 or 4 years, for the term of the patent, or for as long as the company continues to manufacture and market the product.
5. Warrants and Obligations - defines the ongoing responsibilities and contributions of both Licensor and Licensee.
6. Records - giving the Licensor access to company records, only as they pertain to the agreement.
7. Termination - discusses the conditions under which the agreement may or will be terminated. Any of these standard clauses may be called by a different name or contain other terms not included above. Also, there will likely be numerous additional clauses, covering such things as product quality, minimum royalties, product liability, assignments, severability, jurisdiction, etc.