Understanding Licensing Agreements

The idea of a licensing agreement might bring up all kinds of images of high-powered lawyers and corporate boardrooms. But licensing agreements can in fact be an important and practical tool for small businesses. Today, as part of our series on contracts and agreements commonly used by owners of small businesses, we go into the world of licensing, what it is, its purpose, and some examples of how it works.

What is a licensing agreement?

Before diving into how licensing agreements work, it is important to understand what they are. Simply put, a licensing agreement is a legal written contract between two parties, known as the licensor and the licensee that gives someone permission to use another party’s property under a certain set of conditions. The licensor is the party who owns the rights to a certain product, service, or intellectual property, such as a trademark, patent, or copyright. The licensee, on the other hand, is the party who wants to use these rights for specific purposes. To demonstrate, let’s imagine you've developed a new software program that assists small businesses in managing their finances. Other businesses hear about your software and want to use it. Instead of selling them the software outright, you can grant them a license to use your software. This arrangement is a licensing agreement. In other words, it doesn’t give the person ownership over your software, but it does allow them to use it as long as they are following what is said in the agreement.

These are some common types of licensing agreements:

Trademark license?- outlines how you may use a trademark?Patent license?- outlines your right to sell, use, make distribute and export a product that is patented?Copyright license?- outlines your right to reproduce and sell copyrighted assets.

Two of the most common licensing agreements used by small businesses are a Software Licensing Agreement and an End-user Licensing Agreement. Let’s explain these in more detail. If you create software for customers, then you need a software license agreement to protect your business. This agreement exists between businesses, explaining how and when the software can be used and protecting the rights of the parties involved. You can use our Lacoona Legal template to complete your own Software licensing agreement. Follow this?link.

An End-user License Agreement (EULA) is specifically targeted at the end users of software. It can be used by a software developer who wants to grant a license to another person - the end-user - to use their software. The end-user should agree to the conditions in the EULA before the software gets installed. Use our Lacoona Legal template to complete the document by following this?link.

Our AI Assistant,?Jinx, will be able to guide you through the process of completing either of these two documents.

Read more at Lacoona Legal on the purpose of the agreement, what questions to ask when making sure it is sound, and what a licensing agreement should cover.