Every time someone buys your product, you get paid. But before you sign on the points line, there are important things to know about licensing agreements, including the pros and cons of how you will find the right company and some important steps you want to take when considering your options. Abedi, K. (2018, October 22). So you invented something… And now? (License your product). Viewed by sites.psu.edu/entrepreneurshiplaw/2018/10/22/so-you`ve-invented-something-now-what-licensing-your-product-agreement/. The simplest example of a franchise agreement is to be seen in the fast food industry. If you go into mcDonalds or Dunkin donuts, you will see a very similar, if not accurate, business model of branding and product range. These details are dictated by the franchisor. While the franchisee is in daily business, the franchisor has significant control over the process. The franchisor thus retains more control over the service than a licensee over the manufacture of a product (Sharma, n.d.).
Patents are an important investment for small businesses or start-ups. If you don`t have the money to make or sell your own product, or if you simply decide not to, you can concede it to someone else. One advantage for the ip holder who is licensed is that he can potentially have a continuous stream of revenue when he has nothing to do himself. In other words, the licensee has to do all the work to make the profit, and the licensee receives a percentage of everything that is done. Instead of receiving a lump sum in advance and being executed, he is constantly receiving money because the licensee is making a profit. This allows the licensee to have a passive revenue stream without losing property rights. The licensing agreement allowed Starbucks to promote brand awareness outside of its North American operations through Nestlé`s distribution networks. For Nestlé, the company has accessed Starbucks products and a strong brand image.