What is a License Agreement?
A License Agreement is most often used if one person has ownership of a business concept, software, app, or new product that they want to be able to take to market with the help of another party. A License Agreement allows another business to have access to the usage of that licensed property.
When to use a License Agreement:
- You want to provide usage rights to your intellectual property to another person or entity.
- You need to create an exclusive or non-exclusive agreement with another for use of your property.
- You want to provide usage rights within a specific geographical area.
- You need to set up a royalty agreement for use of your licensed property.
- You want to provide usage rights, so another can manufacture your product.
This License Agreement (this "Agreement") is made effective as of between , of , , and , of , , .
In the Agreement, the party who is granting the right to use the licensed property will be referred to as "," and the party who is receiving the right to use the licensed property will be referred to as "."
The parties agree as follows:
. GRANT OF LICENSE. owns (the "Authored Work"). In accordance with this Agreement, grants an exclusive a non-exclusive license to use sell the Authored Work. retains title and ownership of the Authored Work and derivative works will be assigned to Licensor by Licensee. This grant of license only applies to the following described geographical area:
. PAYMENT OF ROYALTY. will pay to a royalty which shall be calculated as follows: The royalty shall be paid at the time of the signing of this Agreement. in installments on or before the day of the week month quarter year period for which the royalty is applicable. . With each royalty payment, will submit to a written report that sets forth the calculation of the amount of the royalty payment.
. RECORDS. shall keep accurate records regarding the quantities of the Authored Work that are sold. shall have the right to inspect such records from time to time after providing reasonable notice of such intent to .
. MODIFICATIONS. Unless the prior written approval of is obtained, may not modify or change the Authored Work in any manner.
. DEFAULTS. If fails to abide by the obligations of this Agreement, including the obligation to make a royalty payment when due, shall have the option to cancel this Agreement by providing days' written notice to . shall have the option of preventing the termination of this Agreement by taking corrective action that cures the default, if such corrective action is taken prior to the end of the time period stated in the previous sentence, and if there are no other defaults during such time period.
. CONFIDENTIAL INFORMATION. The term "Confidential Information" means any information or material which is proprietary to , whether or not owned or developed by , which is not generally known other than by , and which may obtain through any direct or indirect contact with . Regardless of whether specifically identified as confidential or proprietary, Confidential Information shall include any information provided by concerning the business, technology and information of and any third party with which deals, including, without limitation, business records and plans, trade secrets, technical data, product ideas, contracts, financial information, pricing structure, discounts, computer programs and listings, source code and/or object code, copyrights and intellectual property, inventions, sales leads, strategic alliances, partners, and customer and client lists. The nature of the information and the manner of disclosure are such that a reasonable person would understand it to be confidential.
A. "Confidential Information" does not include:
- matters of public knowledge that result from disclosure by ;
- information rightfully received by from a third party without a duty of confidentiality;
- information independently developed by ;
- information disclosed by operation of law;
- information disclosed by with the prior written consent of ;
- any other information that both parties agree in writing is not confidential.
. PROTECTION OF CONFIDENTIAL INFORMATION. understands and acknowledges that the Confidential Information has been developed or obtained by by the investment of significant time, effort and expense, and that the Confidential Information is a valuable, special and unique asset of which provides with a significant competitive advantage, and needs to be protected from improper disclosure. In consideration for the receipt by of any Confidential Information, agrees as follows:
A. No Disclosure. will hold the Confidential Information in confidence and will not disclose the Confidential Information to any person or entity without the prior written consent of .
B. No Copying/Modifying. will not copy or modify any Confidential Information without the prior written consent of .
C. Unauthorized Use. shall promptly advise if becomes aware of any possible unauthorized disclosure or use of the Confidential Information.
D. Application to Employees. shall not disclose any Confidential Information to any employees of , except those employees who are required to have the Confidential Information in order to perform their job duties in connection with the limited purposes of this Agreement. Each permitted employee to whom Confidential Information is disclosed shall sign a non-disclosure agreement substantially the same as this Agreement at the request of .
. ARBITRATION. The parties will attempt to resolve any dispute arising out of or relating to this Agreement through friendly negotiations amongst the parties. If the matter is not resolved by negotiation within 30 days, the parties will resolve the dispute using the below Alternative (ADR) procedure. Any controversies or disputes arising out of or relating to this Agreement will be resolved by binding arbitration under the rules of the American Arbitration Association. The arbitrator's award will be final, and judgment may be entered upon it by any court having proper jurisdiction.
. WARRANTIES. Neither party makes any warranties with respect to the use, sale or other transfer of the Authored Work by the other party or by any third party, and accepts the product "AS IS." In no event will be liable for direct, indirect, special, incidental, or consequential damages, that are in any way related to the Authored Work.
. NON-EXCLUSIVE LICENSE TO LICENSOR. As of the effective date, grants back to a non-exclusive royalty-free license to use the Authored Work as sees fit, including for the creation of derivative works; provided, however, this license shall not limit 's rights and public rights under this License.
. TRANSFER OF RIGHTS. This Agreement shall be binding on any successors of the parties. Neither party shall have the right to assign its interests in this Agreement to any other party, unless the prior written consent of the other party is obtained.
. TERMINATION. This Agreement may be terminated by either party by providing days' written notice to the other party. This Agreement shall terminate automatically on .
. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties and there are no other promises or conditions in any other agreement whether oral or written. This Agreement supersedes any prior written or oral agreements between the parties.
. AMENDMENT. This Agreement may be modified or amended, if the amendment is made in writing and is signed by both parties.
. SEVERABILITY. If any provision of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid or enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited.
. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement.
. APPLICABLE LAW. This Agreement shall be governed by the laws of the State of Commonwealth of .
. SIGNATORIES. This Agreement shall be signed on behalf of by , and on behalf of by , and effective as of the date first above written.
Final Checklist for License Agreement
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Next Steps: Make it Legal
|The License Agreement should be signed and dated by both parties. The Agreement becomes effective as of the date indicated in the document.
|Both parties should retain a copy of the signed Agreement.
Give a signed copy of the document to:
When to Consult a Lawyer
|A lawyer should be consulted regarding any unique issues not addressed by this interview.
|The document should be reviewed periodically to ensure that the parties are each complying with their respective obligations.
|It is not necessary that the signatures be witnessed or notarized.
|Original copies should be kept in a fire-proof and safe location.
Reasons to Update
|Correct an error or change a term in the Agreement.
|Prepare a license agreement for a different transaction.
Members can always consult an attorney at no extra cost!
|If you have quick questions or wish to review this document with an attorney, you can do so for free. Rocket Lawyer's On Call® service makes it fast and easy to speak with a local attorney. Get started by visiting the Find a Lawyer tab on our site, or calling (866) 243-2183.
License Agreement FAQs
License Agreement Considerations
While making the document using our template is simple, there are some things to think about while you are putting the contract together. You want to be able to create a beneficial agreement for everyone and if you are the property owner, you'll want to ensure that your interests are protected. Also keep in mind, that this is a working document that may change a few times during negotiations.
When putting together your License Agreement, consider the following:
Duration of contract and termination terms
You'll need to decide when the contract begins and when it will end. Also, you'll want to write into the contract the actions that may terminate the contract. Most will allow a few discrepancies if they are resolved quickly, but it is up to you to decide what may terminate the contract.
Exclusive or non-exclusive license rights
There are a few ways you can define license rights. Exclusive means that only the person or company you are contracting with and you have rights. Sole rights, would mean only the other party would have rights. This option is rarely used since most people want to continue developing their product or idea. Non-exclusive rights would give you the option of providing rights to others.
Some properties have regional applications. You may want to restrict use in your area to prevent competition. Or you may want to provide rights to others in more than one region. This is often the case with franchises. Some agreements may include a noncompete clause, as well.
You will need to define how the other party may use the property. Can they sell it? Can they alter it and if they do, will you have rights to the altered version?
How will royalties be calculated
This section outlines how you will be paid for the rights to your property. Will you take one lump sum payment? Will get receive a certain amount or percentage per item? Often to protect their interests, people will write in a performance clause. This clause may stipulate that a certain level of performance must be met, or they could lose rights. Additionally, some people outline what is expected in terms of reporting and if they have rights to an audit.
Often the company you provide rights to will want to improve or alter your property. You can define what kind of changes you will allow, such as whether they can rebrand it. If they make improvements, you'll want to ensure that you have rights to the improved version. You may also want to think about how much it will need to be changed to become a new product entirely.
Will arbitration be used to settle disputes?
If disputes arise, how will they be handled? In many cases, the parties choose to use arbitration. Hopefully, everything goes well, and you are able to work thought small disagreements, but you should have a plan in case things don't go well.
A warranty is basically a guarantee that you are going to deliver what you promised in terms of the property. If it is software, it should do what you said it does and should be error free. If it is a physical piece of property that will be replicated, it should be an unblemished, final version.
Your intellectual property or invention loses value if everyone has access to it. To protect your property, you might want to ask the other party to agree to a non-disclosure clause. It is in both of your best interests to protect the licensed property. Sometimes this type of agreement is also called a confidentiality agreement.
In addition, the original property owner may demand to be covered in the other party's business liability insurance, so they are protected if either party is sued.
Many lawyers also advise that it should be your business that signs the agreement and not yourself personally. If you have not yet incorporated, we can help you with the necessary paperwork.
What properties can be licensed?
Most business property can be licensed, including intellectual property. The most common types of licensed property include:
- Trademarks: A trademark license protects your trademark and how and where it can be used.
- Digital assets: This includes things like software and apps.
- Copyrights: This protects original work including artwork.
- Patent license: This protects what many would call an invention.
Trade secrets are considered intellectual property, but they generally cannot be licensed. You normally have to use non-disclosures to protect them.
How do I get my property licensed?
Before you can enter a License Agreement, you must first have the license. The first step may seem obvious, but often people are so excited about their idea or product that they rush through this important step and this is making sure no one else has done it yet. Spending time researching similar products or ideas can help the licensing process go more quickly. You'll also want to protect your asset until you can get it licensed, so no one else copies your idea. The next step is to apply for a patent, trademark or copyright depending on what you need to be licensed. We offer Intellectual Property resources and Trademark services to help you with the process.
Should I hire an attorney?
If you have an idea or product that you think others might want to exploit or copy, it is worth consulting with a lawyer. In addition to having a lawyer help you apply for your license, you will also want to consult with one to help you to make sure your License Agreement is fair and suits your needs. They may see things you forgot to include or may discover areas that may lack the protection you need. Additionally, it is possible that the company you are looking to work with will have a lawyer or legal team, so you may as well have one, too.
What is an unlimited License Agreement?
This type of license agreement is most often associated with software deployments. Unless your property is software or an app, you'll likely not need to concern yourself with it. Basically, an unlimited License Agreement means that a software provider (or SaaS) is allowing a company to have unlimited downloads or user access to their software. If software is your property, you may want to decide how your partner is allowed to distribute it.
Quality control and compliance
You'll want to ensure that if someone is manufacturing or altering your property that the results are up to your standards. If the work is not up to your standards and they fail to comply in a timely manner, this often results in termination of the agreement. You'll benefit from thoroughly defining what your expectations are and what happens if they do not comply. In some cases, you may have to terminate the License Agreement and find another business to work with. If you do find yourself in a dispute, it is wise to talk to a lawyer.