Tag Archives: Licensing

Licensing Agreements

Licensing Agreements

Licensing AgreementsIf there is any type of agreement that should not be grabbed online and used it’s a licensing agreement.

A while back I came across someone who had used an agreement that was appropriate to another country, and in that agreement he had effectively given away all his rights to exploit his intellectual property because the terms of the licence he had granted said that the other party would have “sole and exclusive” rights to use the IP in question. None of the traditional provisions that would safeguard the licensor that one would expect such a licence to include were present either.

In this post, which I’ll discuss shortly, I’ve explained the variety of different transactions that a licence can cover. Therefore, it is particularly inappropriate to find a licence agreement that was drafted for a different arrangement and purpose and use it to license your IP.  Get legal help for any licence agreement.

To explain why the post I’ve just linked you to bears a date 2014, it’s necessary to explain that I recently came across a piece by Neil Patel which ultimately led me to a content marketing site: Animalz. To my surprise, I discovered that content decays. I had always assumed that once you put good content online it stays relevant forever unless by its very nature that content dates. So, I ended up at this free resource from Animalz and entered my details.

 

Licensing and Franchising Blog

They sent me a report after looking at my Google Analytics and analysing traffic to the Azrights site over the last 12 months. This identified 9 articles that have lost 3171 views combined, which means we are missing out on a lot of traffic. So I added the posts they highlighted to my editorial calendar in order to refresh them.

I already knew that a huge portion of the traffic to the Azrights site came from this article Licensing And Franchising, What Is The Difference And Does It Matter? which I had written in 2014 and which ranked on Google. I’d noticed that my article had been knocked off its top spot by an article that was misleading in its information so I was keen to update the blog and set the record straight on this point of confusion that the other article was perpetuating.

So, I have completely updated that 2014 blog in order to more fully explain the difference between licensing and franchising, and in particular to explain the difference between UK and US franchising laws which mean that licensing business formats is possible in the UK but is subject to hefty fine in the USA.

Working Towards Franchising

At Azrights we recommend working towards franchising by testing licensing first. That’s because most of the preparatory actions you need to take to get your business licensing-ready, are actually beneficial in running a better business. So, you would not be wasting time and focus if you take the actions that we recommend to license your business format.

A good starting point if you’re considering licensing or franchising is to consider your brand and IP strategy.

Once you have you’ve got your business ready, found one or two licensees, and tested the concept, you could go all the way and franchise your business if you still think that is the right step to take.

Visit the 2014 blog which, despite bearing the date it was originally written, has in fact been completely updated and refreshed in July 2020, to get the full details for how to do this.

And whatever type of licensing you’re considering, be it brand, or merchandising or simply to license your know-how, bear in mind that the laws in the UK, Australia, USA and other countries differ. That means any type of licensing agreement that you use must be appropriate to the law of the country in which you’re located. Even though you may find plenty of licensing document templates online, do not just download one and use it.

Are you thinking about how to scale your business? Would you like to consider your brand strategy, then attend our upcoming webinar which is provided as a gift – and nothing is being sold on the webinar. It is totally free content.

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Licensing Fran

Licensing or Franchising To Take Your Business to the Next Level

Licensing FranschisingLicensing and franchising are effective ways to take your business to the next level.

Businesses in the UK that are thinking about whether to franchise their business have the option to use a simpler, cheaper approach to achieve the same ends, namely licensing.

What are the considerations when choosing between the two options?

Both options involve finding people with the right skills to be trainable to operate a business using your successful format. They’ll invest to buy the rights to use your brand name and methodology and their chances of success in business will be improved through having access to a tried and tested system that has been proven to work. That’s the essence of the arrangement.

Franchising

Once you select someone to become your franchisee, you will need to train the new recruit in the way you operate your business. They will get access to your proven systems and processes.

Almost any type of business can be franchised.

A franchise leaves you in control of the brand and training, and you’re then giving permission to the franchisee to use your brand and other intellectual property (which includes your know-how) to operate your successful business model.

The franchisee will put up the initial capital for the business, paying you a licence fee. They agree to strictly comply with your established ways of running the business as stipulated in your operations manuals.

The franchisee will be promoting your brand and will expect to have a successful business simply because they will be following a successful proven path. You are expected to provide support to your franchisees in the form of marketing, access to trusted suppliers, systems, and other resources and skills.

Training becomes a core part of your business activity once you take on franchisees.

Permission to use your intellectual property (IP) lies at the heart of a franchise contract.

A franchise agreement will generally give you a lot of control in how the business is run. The franchisee must follow the format extremely closely and not deviate from your established processes and systems. For example, if a customer visits a branch of McDonald’s they must find the familiar products, look and feel and service that they are used to experiencing. There must be no differences that are likely to jar or lead to disappointment.

It’s generally accepted that the slightest difference in the business format could damage the franchisor’s brand, not just that particular outlet. That’s why the franchise agreement will have strict quality control provisions in it, and strong sanctions against a franchisee who attempts to break out and introduce their own ideas.

Licensing

A franchise includes licensing in that “licensing” is a term that simply means the granting of permission to a third party to use the owner’s know-how and other confidential information, trademarks, logos and designs, and copyright materials. For some businesses, there may be patents involved too.

The essence of licensing is also the granting of permissions by the owner to a third party to use some or all its Intellectual Property.

One of the main differences between franchising and a straight licensing arrangement is in the formalities involved to set up a franchise, and the degree of control you retain as franchisor.

If you want to give another business, (perhaps one that’s operating in other parts of the country), permission to use your business format, and don’t want to go through the formality of franchising, then you can create a licensing arrangement based loosely around franchising.

The licensing agreement might impose many of the same controls as a typical franchising deal would include, but without going through the regulations imposed around franchising.

It’s important to make sure the laws of the country in which you’re making your arrangements do not impose fines for effectively running a franchise under a different name. Certainly, in the USA there are hefty fines if you attempt to pass off what is essentially franchising as licensing.

As in all areas of legal life, it’s not what you call something that matters, but what it amounts to in substance.

Some businesses prefer to use licensing rather than franchising. For example, once you receive more enquiries than you can handle, you may decide to use licencing to give other individuals or businesses the right to deliver your solution using your brand. For example, they might continue using their existing business name, and simply offer your product under your brand name as one of their offerings to their clients. They would be trained in your methodology to deliver the product or service to customers in their part of the country.

Brand licensing is how licensing started. I covered this more in Licensing And Franchising, What is The Difference And Does It Matter?

If you have built up a brand name and want to licence third parties to use the name or to deliver a related product using your brand in their own business, then licensing might be a good option.

Conclusion

Any “licensing” deal that is so close to franchising that it blurs the boundary between the two is in truth franchising under another name.

If there are no problems in doing so in your country, then you might want to work towards franchising by using a “licensing” arrangement first. This might be a way to try out the model with a few trusted sources so that rather than diving straight into franchising, with all the due diligence and formalities it entails, you test it out as part of your business model.

The important thing is to use a good agreement that protects your IP. Your brand, patents, know-how, trademarks, etc. These are precious assets, which should not be shared casually. The terms on which you grant licences or franchises need to be carefully considered, and we at Azrights are well placed to support you.

Licensing And Franchising – Why the Difference Between The Two Matters

People often wonder what the difference between these two terms is, and why it matters, so in my blog Licensing and Franchising – What is The Difference, and Does it Matter? I have explained the distinction between the two. In particular I outlined how you would be exposing your business to hefty fines in some jurisdictions, such as in the USA, if you tried to license your business format instead of franchising

 

Franchising

Franchising is the only option if you’re looking to scale a business in the way successful franchise operations like McDonald’s, Burger King, and KFC have done. Here is a list of the top 100 global franchises 

While many franchises involve the hospitality industry, there are also many examples in that list of business formats in other industries such as Kumon Maths, or Cleaning, or Business consulting which would not involve the need for a franchisee to invest in premises.

If you’re considering franchising your successful format and the franchisee would not need to secure premises to opt for your franchise, you have the option to use licensing of you intellectual property (IP) instead of franchising as a first step, and possibly as an alternative to franchising, if you’re based in jurisdictions like the UK which do not impose fines for using the licence format instead of a franchise.

One benefit of this is that there are fewer formalities involved in setting up a licence.

Licensing

The essence of licensing is the granting of permissions by the owner (licensor) to a third party (the licensee) to use IP.

You can identify your own business arrangements basing them around franchising. Or you could even impose the same controls as a typical franchising deal but do it without the huge costs involved in setting up a franchise operation. Test the waters with some licensees you know and trust, and see what works and what doesn’t before you go to the expense of committing to a franchise.

Coaching businesses are an example of a business that might scale by using licensing. For example, an organisation becomes known and successful for coaching a particular group of people.  The owner of the business has more coaching enquiries than they can deal with, so they licence other individuals to coach customers using their methodology and processes.

The reason I am keen on promoting licensing as a first step is that you would be improving your business by taking the steps that licensing involves. These include putting your IP in order, securing your rights properly rather than relying on DIY trade mark registrations, for example. You would transfer your IP to holding company which is well worth doing anyway in order to protect your IP if the trading company becomes involved in a dispute. You would also need to get the right systems in place in your business, such as a suitable CRM, and make sure all your processes are spelt out so that others can operate the various tasks involved in running aspects of the business. Doing this makes sense for any business, not just one that is planning to license or franchise it’s operations.

Once you’ve prepared your business for licensing, and tested the waters with a few licensees, you would be ready for franchising. However, it would cost a fraction of the usual hefty costs involved to set up a franchise, meaning you could probably avoid the need to get a substantial loan to set up your franchise.

 

Conclusion

There is every benefit in using licensing of your business format before going down the franchising route.

Any “licensing” deal that is so close to franchising that it blurs the boundary between the two is in truth franchising given another name. Do make sure the country in which you are making the arrangements doesn’t regulate franchising though, as it could cause you problems.

In my view “licensing” is a good way to try out the model with a few trusted licensees rather than diving straight into franchising, with all the due diligence and formalities that it entails. You could start by finding a few licensees who are willing to license some or all of your business model.

The important point to note is that licensing your brand, know-how, trademarks etc involves your most precious assets. The terms on which you grant licences to third parties need to be carefully considered.

Do contact us to find out how we can help you to license your business format.

What JK Rowling Needed To Know About Intellectual Property law

J K Rowling and Intellectual PropertyJK Rowling is now a successful writer with one of the most valuable brands. It’s taken her just 21 years to get there. Initially, when she sent her first manuscript to publishers, she was turned down by more than 12 of them before Bloomsbury, a publishing house in London, accepted her book.

Authors starting out will rarely have an agent to look after their interests.  So it’s important in those early days, for a writer to take advice on the publishing agreement before signing it. It’s the same with any project involving IP – it’s vital to get IP advice before implementing your ideas.

Why a publishing agreement is so critical 

Certainly, JK Rowling’s considerable wealth didn’t result from book sales alone. However, the foundations for that wealth began with her first publishing agreement which is a critical contract.

The publishing agreement determines how the intellectual property arising may be exploited. The rights you give your publisher set out who may control the various rights in the work you create.

As the creator of the work, the writer will own the copyright in it. Therefore, the agreement should protect your copyright, and you should never give it away to the publisher. So, if your publishing agreement has a copyright assignment clause in favour of the publisher, don’t sign it before taking advice.

Most publishers will let authors keep the copyright, and will insist on having certain rights, such as the exclusive right to print, or to produce translations, licensed to them. Other rights like film, or television rights might well be left entirely to the author, while it will depend on the type of book and the publisher what happens to book club rights or similar.

At the time JK Rowling secured her first publishing deal, who could have known her books would have so much success? Yet if you are someone creating a business, or an artistic work, or piece of music, you need to assume you will be hugely successful, and not give away your rights unthinkingly.

Ownership of copyright underlies JK Rowlng’s wealth

If JK Rowling had assigned her copyright in Harry Potter to the publisher, she would not have achieved the profits and wealth that her writing gave rise to. It’s because she retained ownership of copyright that she was able to licence others to use the name on merchandise, to license the making of films, and to carve out rights to licensees of her work on a geographic basis.

Harry Potter has been registered as a trademark as have other characters, along with many designs produced around the books’ elements. Securing such IP rights or giving others the right to do so plays a crucial role in the income generated by the brand.

Once you own IP rights which are desirable to others to use, you may license a whole host of businesses in exchange for royalties. Licensing increases your  revenues for as long as there is a market for your creations. And unlike physical property there is no natural limit to the number of people to whom you can give a right to use your IP. So the revenues to be earned from IP far exceed what you would be able to earn from investment in physical property like land which may only be let out to one party at a time.

Consequently JK Rowling’s creations have been used on a variety of goods and services. The movie characters have been licensed to theme parks and other organisations, and reproduced on many different merchandise. Licensing agreements are flexible as they allow you to license as much or as little of your IP as you like.  JK Rowling’s creations have made billion dollar profits as a result.

Conclusion

In conclusion, Rowling’s considerable wealth today is all down to her intellectual property, with her biggest source of income being generated from licensing.

So the moral is to protect your IP if you have ideas to bring to the world. Whether you are an author, designer, software developer, or entrepreneur, don’t ignore IP whatever you’re creating. By taking timely advice and setting your IP strategy you will be better placed to secure essential IP assets and build your business on strong foundations. The future growth of any business is based on its IP.

Why not begin by attending my next workshop by following the link on the sidebar of this blog.

 

Formula One Trade Mark Dispute IP Licensing

Formula One Trade Mark Dispute underlines need for Careful IP Licensing

Formula One Trade Mark Dispute IP LicensingThe High Court recently published its judgment in a case involving the Marussia Formula One team. The case related to a claim for trade mark infringement and underlined the importance of businesses ensuring they properly manage their IP rights.

 

The court heard how the claimant had licensed its trade mark to the defendant Formula One team, but that the defendant team had continued to use the trade mark after the licence term had expired. The team was refused permission by Formula One’s governing body to change its name during the course of a season, leaving them with little option but to continue racing and infringe the claimant’s trade mark as a result. Refusing to race would mean forfeiting the team’s entitlement to a substantial amount of money due to it.

 

The court held that the defendant therefore had no real prospect of proving, as it had asserted, that the use of the claimant’s trade mark had occurred with the claimant’s consent. It further held that the defences advanced by the defendant were unlikely to succeed and that the defendant would need to provide £1.75 million by way of security for costs if it wished to proceed to trial.

 

The case shows the importance of considering IP rights at an early stage and ensuring any agreements entered into properly reflect the needs of the parties and protect their interests. In particular, the defendant in this case would have benefitted from ensuring the licence was not timed to expire part way through a season. The facts of the case show the balance of power was strongly weighted in the trade mark owner’s favour, since the licensee was heavily dependent on the owner providing the funds which would allow it to participate in the Formula One season.

 

Many SMEs could potentially benefit by holding their IP in a separate IP company and having the holding company licence that IP to the company through which the business is operated. This has the benefit of protecting a business’ investment in its IP by ring-fencing its intangible assets. This will be particularly important if the main business falls into difficulties and should be considered at an early stage.

 

Marussia Communications Ireland Ltd v Manor Grand Prix Racing Ltd & Anor [2016] EWHC 809 (Ch)

Licensing – Don’t Risk Losing Your Trademark

Licensing – Don’t Risk Losing Your Trademark

If your business has reached the stage where you are looking to expand abroad or diversify into different markets, licensing your brand could be the ideal way of achieving this.

With licensing, it doesn’t matter if you haven’t the staff or the money to fund your expansion. You license your brand to a third party that already has the staff and resources available within the target market in which you wish to expand.

The positives are many: it can be a lucrative move and can generate additional revenue for your business; it can increase your brand awareness; and it can help create new products for your brand without running the risk of failure on your part.

Licensing

Licensing Without Controls

However, licensing has its downsides, too, which can be exacerbated if you don’t manage your licensing effectively. One of the biggest concerns to be aware of is loss of control. So, whilst licensing can boost your brand’s strength, it could equally damage your brand’s reputation.

This is the risk you run if a third party is licensed to use your brand without any restrictions. It’s not just your brand’s reputation that could be damaged; in some cases, a lack of monitoring on how a third party is using your brand name could result in you losing the rights over the name.

Eva’s Bridal Shop

Take the case of Eva’s Bridal Shop in Chicago . In 1966, Eva Sweis opened a bridal shop under the brand name, Eva’s Bridal. The brand built a reputation for providing top quality goods and services. Eva obtained trademark rights in that name.

The trademark was used for generations; friends and family were allowed to set up bridal shops under the Eva’s Bridal label. But in 2007, Eva’s Bridal attempted to take legal action against a former licensee for trademark infringement as he was using the trademark after the license had expired. On the surface, this appeared a fairly simple case of infringement.

However, the original licence agreement exerted no control over the way the trademark was used, and the court ruled that this therefore eliminated Eva Bridal’s trademark rights in that name.

This is because licences over a trademark granted without any regulations or restrictions, are considered to be abandoning the trademark, no matter how long you may have previously had the rights over it.

Therefore, it is vital to ensure when you license a trademark to a third party, it is  not just an agreement stipulating how much you are licensing a trademark for, but also to ensure you have control over the way the trademark is used.

Trademark as a Symbol of Trust

Trademarks are there primarily to indicate to the public the origin of goods, and to protect them from confusion. It enables the public to rely on a brand as a signifier of quality, or standard, and is a symbol of trust.

Therefore, if you are planning on licensing your business, be sure to introduce quality controls, and limit the distributor’s rights to sub-license the trademark.

How to License Effectively

The first consideration when approaching a licence agreement is to describe what is being licensed, and to take account of the extent of your trademark portfolio. What specific products or services are covered and in which geographical areas? Who will be responsible for filing further trademarks, and who will bear the cost of these?

As a general rule, it’s important for you, the licensor, to retain responsibility for the trademark registration. The licence will be for a specific period of time and may impose a number of conditions. In return, the licensee agrees to pay you royalties and is willing to do so because you have something that’s popular.

Licensing can be an invaluable tool to some business owners wishing to expand their brand, so, it is essential to make sure that licensing helps rather than hinders your business.

If you have had any experiences of licensing which you would be willing to share, I’d love it if you left a comment below.

Open Source Software and Business Implications

Open source software (OSS) is defined by Wikipedia as:

Computer software that is available in source code form for which the source code and certain other rights normally reserved for copyright holders are provided under a software license that permits users to study, change and improve the software

Business Applications

Most of the application software used in the everyday running of businesses is typically offered as ‘closed source’ software, this means that users can operate the software, but are not licensed to inspect, modify or improve it.  However, the use of open source software in business is continuing to gain steam.  OSS itself is generally free, the main cost being its configuration, and support.  As such it can be an extremely cost effective means of getting a project underway.

WordPress, an open source Content Management System which facilitates the setting up and managing of blogs and websites, is increasingly prevalent, and for simple sites can reduce the cost of establishing an online presence considerably.  One of the staple business applications in use worldwide, Microsoft Exchange,  is now facing competition from an open source alternative, the German-based Open-Xchange, and we are likely to see further deployment of open-source alternatives to other business applications as similar projects become more robust over time.

Licensing Implications

While open source offers a number of benefits over closed source software, including considerable community support, and increased lead time due to the reduced development costs of new projects, businesses often fail to appreciate the associated licensing implications.  If existing OSS is incorporated into a  new project, licensing restrictions often require that project to be released under a similar licence, and some OSS attracts a licensing fee if it is used for commercial purposes.  It is therefore prudent to take precautions early on.

Prior to incorporating OSS into products it is important to consider future plans for the business.  If control is paramount, and central to monetizing the product, then it may not be an appropriate option, although some licences do allow for incorporation into closed source applications.  Awareness is most likely the key to long term success, if further down the line you want to keep options open, clarify your requirements early on, and take care to understand the licensing terms applicable to any work you might incorporate.

Is Licensing Misuse Piracy?

Polly and friend

Microsoft recently made the statement that they consider any unlicensed use of their software to be an act of piracy regardless of whether the use is intentional or not. Traditionally piracy is defined as illegally copied or counterfeit software. Microsoft spokesman Keith Beeman gave an interesting interview to itBusiness. In the interview he admitted that although they consider licensing misuse piracy they will not use the term when speaking with clients: With customers we don’t go in and say ‘hey, we think you’re pirating our software,’ we say ‘we think you have issues with license and asset management. People have a very different connotation when you say piracy vs. under-licensing or license mismanagement.”

Microsoft reports that the problem of license misuse is pervasive and is found throughout the business world from large enterprises to SME’s. Beeman also explained that often licensing misuse is unintentional and sometimes even large companies buy pirated software from a source they trust without realizing it that the software is infringing.

Regardless of whether it is called license misuse or piracy any business which uses computers, pretty much everyone nowadays, should be aware of the issue. Bringing your software into compliance doesn’t have to be costly and can even save a company money. According to itBusiness “More often though it’s an issue of poor IT asset management. And Beeman said often these tools discover license under-deployment, meaning companies can often save money through better use of what they have.”

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