A Licensing Agreement is a document used by the owner of some form of intellectual property - such as a logo, photograph, or song - to give permission to some other individual to use that property. The Agreement outlines how the Licensor (the Party who owns the property) will grant the license to use their property to the Licensee (the Party who is using the Licensor's property). This type of Agreement is used in situations where the creator of intellectual property is okay with someone else using their property but wishes to ultimately retain their rights to the property and be compensated in exchange for giving the license. This is different than an Intellectual Property Release wherein the owner of the property gives away all of their rights to the work and does not receive continued compensation, known as royalty payments, in exchange for giving permission.
By using a Licensing Agreement, the owner of intellectual property is able to make money while also controlling how their property is used and disseminated out in the world. Further, individuals being granted a license can use other people's intellectual property to grow their own business or make a living while protecting themselves from intellectual property infringement claims by defining the terms of the property's use.
How to use this docuement
This document can be used if an individual wants to use intellectual property that they do not own. Conversely, this document may be used by someone who would like to grant permission to another person to use their intellectual property. This document allows the Parties to specify the length of use and how the property is utilized. For example, the Parties can specify the right to use a trademark or the right to sell or distribute intellectual property for a specific period of time.
The Parties should describe the work being licensed in as much detail as possible, including information about the quality of the work that will be delivered from the Licensor to the Licensee for the Licensee's use. For example, the Agreement might provide that digital images being licensed be given to the Licensee in a particular format, size, or dpi. The Parties can then include information about whether the license is exclusive (the Licensor will not grant licenses to other third-parties to use the property in the same way) or non-exclusive (the Licensor may give similar licenses to other third-parties), the geographical area where the Licensee may use the property, and whether the Licensee is allowed to modify the property to create what is known as a derivative work.
Finally, and most importantly, the Parties can arrange how the Licensee will compensate the Licensor in exchange for permission to use the property by paying royalties. Royalty payments can be calculated in a number of ways including a one-time flat fee, a specific dollar amount paid for each unit of an item containing the licensed work sold by the Licensee, or a percentage of total net sales of any items made using the licensed work sold by the Licensee. The Parties can further specify when royalty payments will be made and what sort of documentation the Licensee will be required to give the Licensor when explaining how the royalty payment amounts were calculated.
There are no laws outlining what must be put into a Licensing Agreement. Overall, intellectual property in the United States is covered under primarily federal law, with the main statute applicable being the Copyright Act of 1976. It is best practice to include as much detail about the work as possible, in your Agreement, so that if a dispute should arise, the rights to the specific work are clear.
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