What Is a Licensing Agreement?
A licensing agreement lets you permit an individual or company to use your intellectual property (IP). This contract outlines the payment the licensee must provide to you, usually in the form of royalties. In exchange, they will be allowed to use your copyright, patent, or trademark according to certain terms.
With this contract, you can expand your brand reach, monetize your IP, and prevent misuse of your property. If you only verbally agree to license IP and don’t get it in writing, you risk another entity using your IP without paying you. You may also spend unnecessary energy and time preventing other parties from using your property.
Depending on the material being licensed, your contract may be referred to as a:
- Content license agreement
- Patent license agreement
- Property license agreement
- Software license agreement
- Art licensing contract
- IP licensing agreement
What Does a Licensing Agreement Allow?
Here is what a licensing agreement allows for the licensee:
- Use brand assets, trade secrets, copyrights, patents, or trademarks
- Sell, distribute, or produce products containing the licensed IP
- Access new technologies without direct development or acquisition
The licensee only gains permission, not ownership. As the licensor, you retain full ownership over the property being licensed.
What Should Be Included in a Licensing Agreement?
A well-written licensing agreement covers the rights, responsibilities, and limitations of the parties involved. Protect your interests by ensuring your contract addresses the key terms below. Legal Templates’s guided questionnaire includes all these components and more, so you can customize it to your specific needs.
1. Licensor
Name yourself as the owner of the IP being licensed. List additional owners if relevant.
Do I Need a Patent or Copyright to Enter a Licensing Agreement?
You may write a licensing agreement without a registered patent or copyright, as you can rely on common-law trademark rights or trade secrets. However, this approach offers less legal protection and can be more challenging to enforce. Consider first getting a patent through the US Patent and Trademark Office or registering your work with the US Copyright Office.
2. Licensee
Name the person who is gaining the right to use your IP. You can list more than one user if applicable.
3. IP Being Licensed
Describe the IP that will be licensed. Examples include the following:
- Copyrighted works (artwork, software, books, movies, articles)
- Trademarks (symbols, slogans, brand names, logos)
- Patents (designs, processes, inventions)
- Trade secrets (processes, recipes, methods, formulas)
- Designs (industrial or product designs)
4. License Type
You can grant a few licenses on your IP:
- Exclusive license: This license gives the licensee the exclusive right to use the IP. With this license, not even the licensor can use the IP. Once a licensor grants an exclusive license to someone, no other licenses on that IP can be given to anyone else.
- Sole license: A sole license can only be granted to one licensee, but the licensor can still use the IP however they want to.
- Non-exclusive license: A non-exclusive license grants the licensee the right to use the IP, but the licensor is free to use the IP and grant licenses to whomever they want. Therefore, many parties can hold licenses to the same IP simultaneously.
Specific Types of Licensing Agreements
Explore Legal Templates’s photo licensing agreement or end-user licensing agreement (EULA).
5. License Purpose
You don’t have to specify a purpose, but it’s recommended so you can control the usage of your IP. For example, you can specify that the license only allows the licensee to manufacture and sell T-shirts featuring the IP.
6. Restrictions
Explain whether the licensee can use the IP worldwide or only in specific countries. You can also impose restrictions, stating that the user cannot:
- Copy or modify the IP to create new works
- Sub-license the IP without permission
- Use the IP in harmful or illegal ways
- Reverse engineer the IP to improve it
- Remove copyright or trademark notices on the IP
7. Fees & Payment
List the fees that the user must pay to the owner in exchange for the right to use the IP. Include the fee type, amount, and due date. Some types of fees include the following:
- Issuance fee: A fee the user must pay to acquire the license.
- Renewal fee: A maintenance fee to keep the license (usually annual).
- Royalty payment: A variable or fixed fee the user must pay to keep using the license (usually a percentage of net sales or gross revenue).
- Milestone payment: A variable or fixed fee the user must pay if they reach certain milestones, such as a specific dollar amount in sales.
You should also specify the number of days a user has to pay applicable fees and whether you can charge interest or late fees if they don’t make their payments on time.
8. Maintenance & Enforcement of Licensed IP
State how you (as the IP owner) will maintain and enforce the licensed LP. For example, you can agree to:
- Make reasonable efforts to keep the licensed IP up to date and pay any necessary fees during the contract
- Inform the user if there are any lapses, expirations, or challenges to the licensed IP that could affect the user’s rights
9. Special Provisions
Note any special provisions, including the following:
- Whether the user can grant sublicenses to its affiliates without written permission from the owner
- Whether there will be a quality control provision for IP usage
- Whether there will be an exchange of confidential information
- Whether the user will need to indemnify the owner
- How often the owner can amend fees for the licensed IP
10. Term
Give term details, including the number of years the agreement will be in effect and whether it will automatically renew. You can also state how many days a violating party has to correct a breach. Also, specify whether the owner can convert a sole license to a non-exclusive license.
11. Dispute Resolution
Disputes may arise from the agreement, so highlight how you and the other party plan to resolve them:
- Court litigation
- Arbitration
- Mediation then litigation
- Mediation then arbitration
12. Owner’s Representations and Warranties
Make these representations and warranties to give the licensee peace of mind that they have the right to use your IP:
- You own and/or control the rights granted in the agreement and have the right to grant those rights.
- You acknowledge that to the best of your knowledge, the licensed IP does not infringe upon or violate any third party’s rights or any applicable law or regulation.
- You acknowledge that you do not know of any claims that, if sustained, would affect the rights in the licensed IP.
13. Governing Law & Effective Date
Name the state whose laws will govern the agreement and provide an effective date for the contract.
Sample Licensing Agreement
View our free sample licensing agreement template to understand what to include. Then, use our guided questionnaire to create a contract that lets you license your IP to others and define how it can be used. Your final contract will be available to download in PDF or Word format.
