licensing agreements how to

Licensing Agreements: Make more Money

In Blog, Copyrights 101, Online Business Necessities by Shannon Montgomery

What is a license or licensing?

A license just means that you are giving someone else the permission to use your intellectual property, your copyrights,  trademarks, and patents. Most people only think you can license pictures and music but in reality you can license ANY of your material. For example, lets say you wrote a very popular Ebook on tracking macros and someone would like to use it to teach a weekend health course, license that out for them to use! 

How is the license structured?

As the owner of the IP you have the ability to allow others to use that for a price. Once you have found someone interested in using your IP you are going get what we call a licensing agreement drafted and signed by both of you.

In this agreement or contract the main thing to do is stay very clear on the relationship, and what the person can and cannot do with your IP.

What are some of the main terms and language you will see in a licensing agreement:

Definitions to note:

Licensee is the person who is getting the permission to use the work and the licensor is you or the owner of the original.

There are two types of licensing agreements.

1. Exclusive license: This means that you are giving that person and only that person the right to use your IP. Not even you will have the rights to use it unless you add a reservation of rights (a section where you describe what you are able to continue to use the IP for). So the exclusive licensee becomes like the “owner” of the work as they are the only ones who can do anything with it.

2. Nonexclusive license:  This allows you as the original author of the work to continue to use it while others use it too. If the content you are licensing out is central to your business maintaining operation, you will likely want to go with a nonexclusive licensing agreement.

Because exclusive licenses give the licensee almost all of the rights under copyright law that you would have as the owner,  I recommend being very careful before giving someone an exclusive license to any of your IP.

However, sometimes an exclusive license can be worth a lot, and be very beneficial to you.

For example, lets say you captured a photo of a great scene at a gym.  Everyone is working hard and people are in the exact right spots.  Lets say that gym is Golds Gym Venice, and they want that photo to be the new main marketing photo.

If you come across a situation like that, an exclusive license may work.   Just remember to charge quite a bit more for this than you would a non exclusive, as you wont be able to license it out to anyone else.

A non exclusive license generally won’t cost as much as an exclusive, simply because you will have more opportunity to license out the work. As for coming up with the price you want to charge or agree to take, that is going to be totally up to you and how you value your work and your IP.  It is a negotiation point so be sure to do exactly that, negotiate it! You should be able to properly value your property based on the amount of time and effort you put into developing it.

Important points to think about when drafting your agreement:

  • Is there a geographic region you want this person to be able to use your content in?
  • Are there a limit on the number of copies the person can make? If it’s a photo can they print as many as they want?
  • The more rights you give away the more you should charge.
  • Can they use the item digitally and in print or just one or the other?
  • If they can use it in multiple mediums are you going to charge for all of these separately?
  • What is the time frame for which the license will exist?
  • Be clear on what you are giving the person, what their rights are, and how much you will charge.
  • Include remedies for the misuse of your IP or any breach of the agreement. This can be any type of penalty. Typically we see four to five times the license fee for misuse or breach.
  • Be sure the person you are licensing out to has a complete and clear understanding of you and your brand, and they won’t use the IP in a way that runs counter to this.

Do not forget this is going to be a negotiation, and technically you can agree to whatever you want.  Just be sure you’re doing what is best for you and your brand. If you’re interested in negotiation tactics feel free to reach out and we can discuss further.

Be sure you both sign and date the agreement, and always keep a copy somewhere safe and protected!

Those are the basics of licensing agreements. Always remember that it is your IP and your brand so be careful when you get into one of these. Pay attention to the language of the agreement and ensure its the type of agreement you want (ie exclusive vs not etc) and you do have the freedom to charge what you want (unless it is music as the industry has some specific rules on that).

I hope you found this article helpful. If you have further questions or want help drafting or negotiations a licensing agreement for yourself, feel free to contact us at Montgomery Law! You can find us on Instagram: MontgomeryLawPllc and Facebook too!

Please note that this is not meant to be legal advice for you or your situation, this is merely some legal research and knowledge on the given topic.