There is no point in having a great invention (see patents), design, or brand if you cannot benefit from it. Licensing can provide that opportunity for business growth, and the following text provides information about this and related IP issues.
When considering which model would be the most appropriate means to grow a business, the business owner (i.e. the franchisor or licensor) needs to think through the nature of the business and what degree of control over the IP or brand is required when used by others and how this might impact on reputation. This includes, how much freedom to give the franchisee, or licensee, in his/ her use of trade marks and other IP. For a franchising company like McDonalds or Body Shop ensuring rigid control and consistency of product at all locations is vital for growth. However, for a software seller it may be less important to so precisely control the use of its IP and therefore licensing is a better model for growth.
Both arrangements can generate significant revenues through the royalties and cost sharing that can occur. That is the reason that many businesses use these models as otherwise it would be difficult to expand and grow the business out of internal cash and resources alone.
If you are looking for information about franchising as a model for business growth, please click here.
How Can Licensing Aid Business Growth?
In a licensing model the business (the licensor) is ‘selling’ the right to use its intellectual property (IP), brand, or business processes to another party (the licensee). Licensing has always been a way of increasing the “leverage” of your intellectual property. However, beware, in order to have enforceable licences that give security and sufficient understanding can be very complex to draft and requires the support of up to date and specialist legal knowledge in IP.
Typically licenses are not restrictive in terms of identifying a territory or a market for the exclusive use of the licensee. Additionally, once the right to use the IP/ brand has been sold, the licensor may not retain significant control over how the licensee does business. Having said that, specific limits can be put in place over how the licensee uses the intellectual property. An example of a licensing arrangement is a software company licensing rights to end users to use its software for a myriad of end uses.
What is Royalty Auditing?
Royalty audits are usually central to a business’s overall IP strategy. They are designed to address the completeness and accuracy of the licensee’s royalty reporting while, at the same time, maintaining the relationship between the licensor and the licensee.
As these audits often involve complex interaction with what may be an adverse party they are usually undertaken by specialist financial firms. The role of IP specialists such as Brand Protect in addressing royalty fraud worldwide, is to offer:
- A detailed review of all aspects of your royalty agreement
- Contract wording analysis to avoid misrepresentation
- A review of the terms of your contract for fairness.
- Suggested solutions keeping your best interests in mind
How can Brand Protect help?
BRAND PROTECT is a specialist niche legal firm offering advice and assistance on all aspects of IP, and has gained extensive experience in the franchising and licensing sector. Our franchise and licensing agreements have been used by some of the largest companies in the world. The team at BRAND PROTECT includes a qualified trade mark attorney and a specialist IP barrister. With this breadth of experience and knowledge, we are able to advise you, not only on the development of your IP but also on how to protect and retain it, to ensure it contributes to the growth of your business.