Constructing your license agreement to meet your needs

Many a business’s most valuable asset is its right to regulate who uses, and who has the right to use, a particular product.

If you own the product, the right to use the product is inherent in your ownership. You will only be not able to use that product if you have given up the right to use it. When a person or entity who owns a product grants the right to use that product to another person or entity, generally he or it will be giving up the right to use the product within a particular geographical area for a for a period of time.

If you don’t own the product, the right to use the product will only exist in you if you have been granted that right by the owner of the product, or some other person or entity to whom the owner has given the right to use (and to grant the right to use) the product.

Such a grant is known as a “license”. It is no different to being granted the right to drive a motor vehicle on a public road. A license gives you the right to do something subject to the terms of the license. In the case of driving a motor vehicle, the terms of the license provide that you must comply with the Road rules or you risk being fined or losing your license.

McDonalds operates most of its shops through franchises, whereby the franchisee has been granted a licence to use the McDonald’s branding and product to operate a fast food business.

The generic term for these agreements is “license agreement”. However, in practice they have a variety of names including, “license agreement“, “distributor agreement“, “franchise agreement“, “supplier agreement” etc.

The name given this type of agreement is not particularly important. It has little, if any, legal effect. What is important, is the content of the agreement’s terms.

If you are granting the licence (the Licensor), generally you would want the agreement, amongst other things, to: be fair and reasonable such that it represents good value for you and the licensee; encourage and reward the licensee for supplying more of the product; enable you to terminate the agreement (or have it revert from being an exclusive licence to a non-exclusive licence) if the licensee is under-performing; retain your right to use the product to the extent that you require such use; and, protect your intellectual property.

If you would like to have us tailor an agreement for you, click here and we will forward you our questionnaire for you to complete and upon receipt of the completed questionnaire one of our lawyers will contact you to discuss your answers and our costs.