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All about Brand Licensing – A global Approach

All about Brand Licensing – A global Approach

All about Brand Licensing – A global Approach

According to “THE BRAND LICENSING HANDBOOK” published by “eCommerce Insights”, licensing is the process of providing trademark or copyright to be used for a product, service or promotion. The property could be a name, likeness, logo, graphic, saying, signature, character or a combination of several of these elements. A walk down the high street illustrates the impact that this simple business arrangement is having on both the consumer and an increasingly diverse range of retailers, from discounters to retailers of luxury goods.

It’s reasonable to think that the licensing industry begins and ends with toys and games. Indeed, the prevalence of popular film franchises, children’s television series, apps and video games – often associated with intensive, seasonal, consumer marketing campaigns – certainly perpetuates this perception. Licensing is, however, much broader than that. Its scope and reach extends across a wide range of product categories including Apparel & footwear, Fancy, dress & party, accessories, Stationery, Greeting cards, Posters & prints, Giftware, Homeware, Fashion, accessories, Groceries, Health & beauty, Publishing, Promotion, Electronics, DIY & gardening, Lifestyle & leisure.

Terms and phrases of Brand License

Terms and phrases of Brand License

To license: To give permission to a third party to use a legally protected intellectual property in conjunction with a product, service or promotion.

Intellectual property (IP): Commonly known as the ‘property’ or IP and typically, for licensing purposes, a television, film or book character, television show or film franchise and brand. It can also refer to anything and everything including celebrities, sport clubs, players, stadiums, museum and heritage collections, logos, art and design collections, and lifestyle and fashion brands.

Licensor: The owner of the intellectual property.

Licensing agent: A company appointed by the licensor to manage the licensing programme of a particular IP.

Licensee: The party – whether manufacturer, retailer, service provider or promotional agency – that is granted the rights to use the IP.

License agreement: The legal document signed by licensor and licensee that provides for the manufacture, sale and use of licensed product against agreed commercial terms, broadly known as the schedule.

Licensed product: The product or service that carries the licensor’s IP.

License Period: The term of the license agreement.

License territory: The countries that the licensed product is allowed to be sold or used in during the course of the license agreement.

Royalties: The monies paid to the licensor (or collected by the licensing agent on behalf of the licensor), usually paid on gross sales with certain limited deductions.

Advance: A financial commitment in the form of royalties paid in advance, typically on signature of the license agreement by the licensee.

Minimum guarantee: The total royalty income that is guaranteed by the licensee over the course of the license agreement.

Royalty accounting: Defines how the licensee accounts for royalty payments to the licensor – typically quarterly and retrospectively at the end of March, June, September and December.

 

Principal types of brand license agreement

Once the broad terms are agreed, you’ll sign a deal memo or heads of terms agreement that simply summarises the top commercial points. At this point the person you’re negotiating with will probably need approval from their management or, if you are working with a licensing agent, the brand owner itself. There could be a little delay and, of course, if you’re pitching for rights against a few competitors,

the process could be a bit nerve-wracking. However, once you have approval, you’ll be sent a long-form contract (though you might wait a few weeks or months for the legal department to catch up!).

Be careful not to expend too much time and money until you’re confident the licensor has approved your deal in writing.

When you receive the license agreement, you will note that this is broadly broken down into two parts: the general legal terms and the commercial points specific to your deal. We’ll deal with the commercial points in the next section but the legal aspect may need input from your legal team. However, in my experience, many companies take a commonsense view, especially if dealing with a big corporation.

 

There are three principal types of license agreement:

Standard License: In standard license type, the licensee is free to sell the products to any customers within the agreed parameters they deal. The licensee may want to maximise the number of customers who list their merchandise and this works well for most businesses with a broad client base. If the licensee a manufacturer and only sell to four retailers, they may well just agree that the agreement limits to selling to these four. Basic rule of thumb: the more product categories you have, the broader your customer base, and even the more countries you sell to, the greater your likely sales and royalties.

Direct to retail (DTR): Here the licensor has an agreement directly with the retailer, which will then source products directly from its supply chain and pay the licensor any royalties due. Retailers benefit from using their existing supply chain, helping to optimise margins, while licensors have some security in knowing the products will be available on the high street.

Triangle sourcing: Here the retailer and supplier effectively agree an exclusive arrangement. The supplier may take on the legal responsibility (the contract is probably in its name), but the retailer will be equally bound to buy their merchandise. This minimises risk for the supplier (licensee) and allows them to give the retailer a little bit more margin. A variant is where the licensee works with different retailers and their nominated suppliers.

The handbook which has been published on eCommerce Insights website sets out to help retailers capitalise on the enormous power of major licensed brands. By purchasing stock of hot, licensed, branded goods, buyers can drive footfall into physical stores and online. The right license can increase sales, boost your profile and provide an alternative to developing your own brands.

Source : eCommerce Insights – A complete hand book can be downloaded from eCommerce Insights website.

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