A contract granting one party permission to use another party's intellectual property, brand, technology, or other proprietary rights under specified terms and conditions.
What Is a Licensing Agreement?
A licensing agreement is a legal contract in which the owner of intellectual property (the licensor) grants another party (the licensee) permission to use, produce, sell, or otherwise exploit that property under defined terms and conditions. The licensor retains ownership of the underlying intellectual property while the licensee gains specific usage rights, typically in exchange for royalty payments or license fees.
## Types of Licenses
- **Exclusive license** grants rights to only one licensee, excluding even the licensor from using the IP in the licensed territory
- **Non-exclusive license** allows the licensor to grant the same rights to multiple licensees
- **Sole license** grants rights to one licensee but allows the licensor to continue using the IP
- **Sublicense** allows the licensee to grant usage rights to third parties
## Essential Terms
A well-drafted licensing agreement should address the scope of the license (what is permitted), territory and duration, royalty rates or fee structure, quality control standards, sublicensing rights, termination conditions, representations and warranties, indemnification, and dispute resolution. Both parties should ensure the agreement clearly defines performance obligations and the consequences of breach to avoid costly disputes.