Licensed products: Overview, definition, and example
What are licensed products?
Licensed products are goods or services that are sold with the permission of the owner of a specific intellectual property (IP) right, such as trademarks, patents, copyrights, or brand names. Licensing refers to the arrangement in which the owner (the licensor) grants another party (the licensee) the right to use the IP for a defined period and within specific terms, usually in exchange for royalties, fees, or other compensation.
Licensed products can be physical items, such as clothing, toys, or electronics, or they can be digital products, such as software or content. Licensing is a common practice in various industries, especially in entertainment, fashion, and technology, where brands or characters from popular media (e.g., movies, TV shows, or sports teams) are used to create and market products.
Why are licensed products important?
Licensed products are important because they offer businesses the opportunity to expand their product offerings by using established and recognized brands, characters, or technologies. For the licensee, obtaining the rights to produce and sell licensed products allows them to tap into the reputation and popularity of the brand or intellectual property, attracting consumers who are already familiar with it.
For the licensor, licensing offers a way to generate additional revenue without directly manufacturing products, while maintaining control over the use of their IP. Licensing can also help enhance brand visibility and increase market reach, as licensed products are often promoted in various channels, including through partnerships with well-known retailers.
Understanding licensed products through an example
Imagine that a popular movie studio owns the rights to the characters and themes of a well-known superhero franchise. A toy manufacturer, Company X, enters into a licensing agreement with the movie studio to create action figures based on the superhero characters. As part of the agreement, Company X pays a licensing fee and agrees to follow specific guidelines about how the characters should be depicted in the toys.
The licensed products—action figures of the superheroes—are sold in stores, and because the characters are widely recognized and loved by fans, the toys become highly sought after. The movie studio earns royalty payments from the sale of the toys, while Company X profits from the popularity of the licensed brand. In this case, the action figures are licensed products that are created and sold with the permission of the intellectual property owner (the movie studio).
Example of a licensed products clause in a contract
Here’s how a licensed products clause might appear in a licensing agreement:
“The Licensor grants the Licensee the right to manufacture and distribute licensed products under the trademark [Brand Name], which shall include, but not be limited to, [list of products such as clothing, accessories, and toys]. The Licensee agrees to pay the Licensor a royalty of [X]% of the net sales from the licensed products, and to comply with the quality standards and guidelines provided by the Licensor.”
Conclusion
Licensed products represent a mutually beneficial arrangement where businesses can leverage established intellectual property to create popular and marketable products. These products allow licensees to capitalize on the brand recognition and consumer loyalty of the IP owner, while providing the licensor with additional revenue streams and expanded exposure.
Whether in fashion, entertainment, or technology, licensed products are an essential aspect of brand expansion and can be a highly effective strategy for both parties involved. Understanding the licensing process and terms can help both licensors and licensees maximize the potential of these products while ensuring compliance with legal and brand guidelines.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.