Tips in Creating a License Agreement
In a business, license is usually given by a company that wants to give the rights to other companies in payment return. The rights are usually aimed to use or sell or make something your business owns. Therefore, it is very important for you to know how to make a license agreement.
What to Include in a License Agreement
License agreement template is unique. It is various depending on the type such as patent, trademark, copyright, etc. Generally, a license agreement includes some sections. The first section of this agreement is subject matter. It describes the trade or service or product being licensed.
After subject matter, you will need to include the definitions of terms & details. Make sure that you describe them clearly. Then, what you have to include next is license. Here, you should describe the license’s time limit, extent, and exclusivity assertion. Describe about what the license can do, too.
Payment should also be included. It relates to the payment details to the licensor that include whether there is base of percentages and royalties. It also describes how & when the payment is made. You also must describe how the sale is verified & the right of licensor to annual audit & periodic sale verification.
Restriction is the next part of this agreement. It is about what a licensee cannot do with license. For example, a licensee cannot sell it in a certain price or use in certain ways or certain kinds of product. You also have to mention when the agreement starts & ends clearly.
When writing a license contract, you also need to include non-disclosure agreement. In this section, all parties agree not to disclose the secrets of trade. Non-complete agreement should also be included, too. Here, the licensor agrees not to let anyone to compete in territory & time period mentioned.
You cannot forget to include jurisdiction. It is where the case should be tried. Usually, it is a United States. The last element to be included is dispute settlement. You have to describe how the disputes are settled. Besides that, you also must describe whether arbitration is a requirement or not.
There are some factors that are involved in this agreement. The first factors are exclusivity & territory. The second factor is subsidiary licensing. The third factors are payments. The forth factors are monitoring & quality assurance. The last one is sub-agreements.
There are many tips that you need to consider in writing this agreement. First, you must build ownership. Second, you have to pay attention to the definitions. Third, you need to describe how the royalties work. You also must explain monitoring & quality assurance process in this kind of agreement.
Next, writing a license agreement also requires you to check on the regulations of the government. It is also important to do the due diligence before you make the agreement. Next, you should consider other what-Ifs. Last, it is a must for you to understand about taxes. That is all.
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