Certain brands have become so popular that we can trust the quality of the product simply by the trademark it has on it. The power of intellectual property should not be downplayed. In fact, it needs to be protected, and using master use license agreements is one way to do that.
But what are license agreements, and how do you create a binding agreement and make the most out of it? Let’s check out all the details in our licensing agreement guide.
Interested parties should know the master use license definition before creating this type of agreement. A master use license is a contract between two parties whereby a property owner allows another party to use a brand, patent, or trademark.
Contract types differ according to what is being licensed. Licensing agreements also prevent disagreements concerning sales, quality grievances, and royalties.
There are certain factors to consider when researching how to get a master use license. Here are the key of them:
Considering that license agreements cater to a range of diverse aspects, it's crucial to accurately identify the specific type of license you need. Whether it's for software, music, images, or patents, the license type determines your legal rights and the extent of usage permitted. Understanding your requirements will ensure that you select the right license agreement, thus safeguarding your interests.
Trademarks identify certain brand names, logos, or slogans. Trademark licensing agreements facilitate trademark owners in allowing others to use their intellectual property (IP). Trademark owners may allow the use of their trademarks for money-making ventures involving clothes, cell phone cases, or food.
Copyright licenses are used for forms of art. They can be visual art, such as paintings or movies. There is also a master use license for music. Copyrights are also used for unique characters like Mickey Mouse.
Copyright end-user license agreements are often used for consumer products, similar to trademark licenses. License agreements are also used in distributorships, such as recordings or movies.
It is another important element to include in all license agreements you deal with. Trade secrets are distinctive because they are not registered through the government. Patents, trademarks, and copyrights hold the most value after being registered with the federal government, and trade secrets are usually safeguarded just by secrecy. That’s why it’s essential to take care of the licensing agreement. Two of the most popular trade secrets are owned by Coca-Cola and KFC.
If you need a master use license, remember that trade secret licensing agreements often go hand in hand with non-disclosure agreements (NDAs). An NDA is because the parties agree that the person receiving the stipulated confidential data cannot divulge it to anyone without penalty.
The payment clause is crucial in any agreement, and the license agreement is no different. Many payment methods depend on the licensing agreement when choosing whether to opt for monthly, quarterly, or once-a-year payments. Payment is for licensing fees or royalties, which will also affect taxes. The licensee generally pays the royalty fee upfront in a licensing agreement.
This is an essential condition to include in the license agreement. The document must mention what territories are allowed to use the brands, trademarks, or creations.
For instance, a trademark owner with limited jurisdiction cannot extend his or her brand and sell goods or services under the trademark, let’s say, in California. If the license agreement does not restrict the use of the trademark and the licensor uses it in California, the owner will be at risk of a lawsuit for trademark infringement.
In this clause, ensure that the licensee is the only one with the rights to supply goods/services under the brands or trademarks. If, however, these rights are not to be restricted to one licensee, be sure to include that information in your license agreement. Failing to regulate this provision in the agreement can increase the probability of a dispute.
An exclusivity provision is written in these licensing agreements partly to safeguard the market. For instance, placing another hotel next to an existing hotel would be counterintuitive, as one hotel might pull business from the other. With exclusivity provisions, territory limitations can protect the market territories in the vicinity of licensee businesses.
The duration of the relationship is another important consideration of a licensing agreement. It is typically calculated in years of a baseline or effective date; a two- to three-year contract is standard.
While this might seem like a standard term in any license agreement, the license and contract terms should not be confused. As such, it would be better to place the license and contract terms into separate clauses of licensing agreements to ensure that all points are clear.
When looking at the licensing of trademarks, it is essential to specify in the license agreement that the licensee will exercise discretionary supervision and control over the use of the trademark and the quality of the products for which the trademark is used. It’s better to ensure that all the licensing agreements have this clause.
Failing to do this could result in abandoning the trademark by granting a naked license. As was seen in the case of Eva’s Bridal Ltd. v. Halanick Enterprises, Inc., it was held that trademark law necessitates that the “decision-making authority over quality remains with the owner of the mark.”
A licensor must decide whether he wants to grant the right to the licensee to sub-license the innovation to additional parties. Allowing a sublicense can increase income because more people or organizations can use the brand, trademark, software, or innovation. However, this may also dilute exclusivity, making it more difficult to control some products.
If the license agreement allows for an affiliate or sub-distributor, it should be mentioned in the contract. A subsidiary relationship would permit the licensee to enable a third party to use or distribute the property. To be protected, licensors should ensure that expectations of this type are stipulated in the brand licensing agreement before signing. In this case, such licensing agreements are legally binding and protect the parties.
You should be thorough when drafting a licensing agreement to protect your business. The licensee and licensor must agree. Consider enlisting a lawyer for help or drafting a master use license agreement from a template online in just a few clicks.
Such templates are crafted by professional lawyers and help people save both money and time when dealing with licensing agreements.
Secure your business with our master use license agreement
Standard mastering license agreements should have the following structure:
"The license agreement consists of basic provisions that we are all used to, such as contract length, dispute resolution, definition, etc. But this agreement must also contain specific provisions, such as territorial agreements, quality control, exclusivity, etc."
Karyna Pukaniuk, Head of Legal at Lawrina
This is important because all license agreements differ, and the provisions must consider those differences.
The provisions need to flow with each other.
"When you work with a license agreement, all provisions must work logically with each other. For example, if you decide that your license agreement will be exclusive and you will not give anyone the rights to your brand, trademark, or innovation, then it will be illogical if you grant your licensor the right to sub-license in the same agreement."
Karyna Pukaniuk, Head of Legal at Lawrina
It is also important to be consistent throughout the agreement and avoid contradictory provisions.
"As I usually say, If you have a long-term contract, reserve the right to revise the royalty amount. So, you can keep a competitive price for your innovation for a long time."
Karyna Pukaniuk, Head of Legal at Lawrina
You should be able to change the rate according to the competitor’s prices, the economy, etc. So, take care of this step when crafting a licensing agreement.
To safeguard your brands, trademarks, and innovations, be sure to maintain control of their use and the quality of the products for which your brands, trademarks, or innovations are used. If a licensee neglects quality, it will affect the brand owner. Therefore, violating quality conditions or ignoring the licensor’s quality requirements may be grounds for terminating the license agreement.
Getting master use license agreements ready for signing means following a few specific steps when drafting the document.
A good starting point is the parties when doing a licensing agreement. Before entering a licensing agreement, learn more about the other party before affiliating with them. Investigate how they operate. You will want to ensure that you are contracting with the right people.
Clearly describe the licensing subject, stating what the other party will be allowed to use and other rules and restrictions.
Ensure that all specific provisions for the license agreement, including territorial licensing agreements, quality control, exclusivity, etc., are included in the contract. Also, include all the introductory provisions for the duration, dispute resolution, remuneration, confidentiality, etc.
Proofread the licensing agreement to make sure that everything necessary is included and that each party’s rights are protected. Refer to a professional master use license agreement template that you can easily fill out online and download a PDF copy to share with the other party.
These license agreements protect intellectual property and govern its usage. It is important to include certain master-use license elements to ensure that a contract is precise, there is no room for disputes, and the rights of both parties are protected. When creating the agreement, consult reliable sources and follow the necessary steps to ensure that your contract is clear and follows the master use license legal rules.
Karyna Pukaniuk, Head of Legal at Lawrina. Experienced Tax and Corporate Lawyer, team leader, and legaltech pro. Led and backed the smooth operation of the legal team and accompanied several different projects simultaneously. Worked closely with department's leads, and shareholders and advised them through all legal, regulatory, and risk management matters. Supervised multi-million dollar M&A deals and actively participated in the company's product development.
A master use license agreement is typically sought after by filmmakers, television producers, advertisement agencies, video game developers, and sometimes music artists. These individuals or entities need the legal right to use an already existing, copyrighted sound recording to incorporate it into their respective works, such as movies, TV shows, commercials, video games, or sampling in a new song. They approach the original recording copyright holder to obtain the master use license agreement, which gives them the permission needed to use the recording within the framework specified in the agreement.
The transferability of a master use license agreement to another party is contingent on the specific terms stipulated in the agreement. Generally, an agreement cannot be assigned or transferred to another party without the express written consent of the licensor, i.e., the copyright owner of the original recording. If a party wishes to transfer a master use license, they should ensure the license agreement includes provisions for assignment or an explicit procedure for obtaining the licensor's consent.
The termination procedure for a master use license agreement largely depends on the specific termination clauses outlined in the agreement itself. Typical grounds for termination may include a breach of agreement, such as unauthorized usage of the sound recording, non-payment of licensing fees, or the expiration of the term of the agreement.
Other circumstances, like the bankruptcy of the licensee, could also lead to the termination. The precise terms should be laid out in the agreement, and thus, it is highly important for both parties to thoroughly examine these clauses before entering into the agreement to understand their implications and consequences.
Article by Karyna Pukaniuk