With every Licensing Agreement there should be attached a one page summary of the agreement that highlights the Property being licensed and what the most significant conditions and terms are. Here is the Schedule ‘A’ used in the Licensing Agreement between my corporation and the American Automobile Association, which allowed the usage of the AAA logo on my educational board game titled – THE FRIENDLY FREEWAY.
SCHEDULE A
PROPERTY: AMERICAN AUTOMOBILE ASSOCIATION Name, Motif and Logo as described in diagram section of this Schedule.
Here was the diagram of the three A’s within an oval circle with the words American Automobile Association underneath it.
LICENSEE PRODUCT DESCRIPTION: Educational Board game titled:
“THE FRIENDLY FREEWAY” including and/or all components, designs, characters, and reference materials including with this game design, Copyrights and Trademarks.
TERRITORIES: WORLD WIDE.
INITIAL TERM: Three (3) Years From _____ to _____.
TERM OPTION: As per this Contractual Agreement.
ROYALTY PERCENTAGE: 7.5 % from Net Wholesale Price or 75 cents whichever is greater.
SPECIAL PROVISIONS: Refer to this Contractual Agreement.
LICENSOR and LICENSEE can also sign the bottom of Schedule ‘A’. That way any one can see that the parameters of the entire understanding between the two parties is outlined on one page and agreed to because both signatories have signed the Schedule A as well as the actual Licensing Agreement.
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Schedule ‘A’ is an important attachment to the actual Licensing Agreement since it visualizes and describes the Property that is going to be licensed. Most Trademarks are diagrams and need to be shown to get a good representation of what they look like and to ensure there is no misunderstanding between the two parties on what is really being licensed.
The Licensee Product description is important to clarify what exactly will be allowed to use the Property on. Put every version of the product(s) that will be utilizing the Property, including all any and all advertising and marketing materials.
Some contracts allow for World Wide usage of the Property, where others will allow only one country or a group of nations. Make this as clear as possible by naming every nation if you do not have World Wide usage. This will ensure there are no misunderstandings on where the Property can be used.
The Term can be for any time period agreed by both parties. I recommend that you put a clear date from and to, with possible extensions if any are allowed. Ask for no less than three years.
Royalty amounts can vary from contract to contract and here is where the skill of a good Licensing Specialist can help secure a deal but also a great royalty price. This negotiation stage is the most important and my expertise is in this area. Several times I have been able to secure a better royalty rate and/or contract conditions than the lawyers representing both parties, all because of my previous licensing negotiation experience and skilled win-win-win techniques that legal counsels do not specialize in.
In this Licensing Agreement I believed it was in our interest to have a percentage based royalty (7.5 %) because the Canadian currency was rising, yet the American Automobile Association desired a fixed royalty rate of seventy-five ($.75) cents to ensure a minimum fee per product sold. That is why there is both a percentage royalty rate and a minimum fee royalty rate.
Any Special Provisions or Additional important facts can also be included.
Having both Parties sign the bottom of the Schedule ‘A’ allows for only this one page summary to be shown to third parties, instead of the entire Licensing Agreement (to prove there is an agreement for the usage of the Property). It also helps make it look more official.
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For the beginning of this series of posts, start at the first one dated Sept 14, 2009 (scroll down).
As most of you know, I am not a lawyer or an accountant and I recommend everyone seek their own legal counsel, accounting and tax advice in all contractual matters.
I provide consulting services and more details are on the ‘services’ page of this website.
I hope this contract breakdown helps you understand the intricacies of a Licensing Agreement. Should you have any questions contact me at info@Playdigm.com – please put ‘Your name’ & the word ‘Licensing’ in the subject line of your email.
Thank you.
Sandford Tuey