For a licence to exist, there must be a contract between two or more parties that explains what property rights the licensor gives to the licensee. This Agreement or this Agreement is referred to as the License Agreement. These agreements have existed since the first copyrights and patents were granted in the late 1700s. In May 2018, Nestlé and Starbucks entered into a $7.15 billion coffee license agreement. Nestlé (licensee) has agreed to pay $7.15 billion in cash to Starbucks (the Licensor) for the exclusive rights to sell Starbucks products (single-use coffee, tea, bean bags, etc.) worldwide through Nestlé`s global distribution network. In addition, Starbucks receives royalties on packaged coffees and teas sold by Nestlé. A good business tip on licensing agreements can be summed up as CYOA – “cover your own. behind. Whether your company holds a licensee or a licensor, you need to pay attention to your own interests and negotiate licensing agreements that suit you. Of course, it will give and take, and in general, licensees have less power when it comes to making applications.
In the Licensing Journal, George A. Frank explained: “The patents that some companies had received for reasons not directly related to technology development or transfer turned out to be a huge untapped resource. IP licenses have now become a huge source of revenue and, in fact, not an important criterion by which a company`s success is measured” (2004). IBM, for example, earns more than $1 billion a year through its intellectual property licensing program. To be successful, a licensing agreement must benefit all parties involved. By acquiring rights to a patent, a licensee may: Typically, a trademark owner grants a license to use trademark rights in areas where it does not have the appropriate expertise, infrastructure, or capital resources to maximize the value of the right. While the licensor exploits trademark law, the licensee relies on the recognition of the name or symbol of ownership to influence consumers and motivate them to purchase a particular item. Characters that have enjoyed great popularity through brand licensing relationships include Mickey Mouse, Barbie, and The Lion King.
A major trend has been for manufacturers and retailers to build the core of their branded products business. Licensing comes with certain risks and disadvantages. The company may lose control over the production and marketing of its products in other countries.