Licensing Defined
A licensing agreement is the lease of a legally protected property, such as a trademarked image, for use with a product or line of products. The licensee rents the right to use this property in association with their product.

Licensing involves a contractual agreement between the licensor and the licensee. This contract ensures that the use of the licensor’s property is restricted by specific conditions. For example, the contract may require that the licensee’s product be distributed in a certain geographical area or produced only for a set time period.

When renting a property, the licensee pays the licensor a guaranteed minimum royalty. They will also pay the licensor a percentage of total sales of the product.

Licensing terms are explained in the next section.