Posted in Finance, Accounting and Economics Terms, Total Reads: 359
Definition: Licensing Agreement
The word ‘license’ means to give permission. A licensing agreement is a legal contract and it involves two parties – licensor and a licensee. This is usually a written document wherein the owner of the property (licensor) gives permission to the licensee to utilise his property for a specified period of time. The licensor accepts some amount as a fee (termed consideration) for granting access to his property.
Licensing agreements are usually signed to protect intangible properties. Examples include copyrights, patents and trademarks to protect the technological innovations, logos, company names and the like.
A typical license agreement for a software looks like this:
Some of the points to be covered in a licensing agreement are the scope of the license, revenue from the product (in terms of royalties, monthly lease payments), agreement length, prohibited uses, warranty, contract termination. We can also include other terms depending upon the agreement between the two parties.