Licensing agreements are a powerful commercial tool. When structured correctly, they allow businesses to expand into new markets, generate additional revenue streams and strengthen brand recognition, all without the cost and risk of doing it alone.

However, without careful drafting and clear commercial planning, licensing arrangements can just as easily expose your brand, intellectual property and reputation to significant risk.

What Is a Licensing Agreement?

A licensing agreement is a legally binding contract in which the owner of intellectual property (the licensor) grants permission to another party (the licensee) to use that intellectual property in defined circumstances.

The intellectual property licensed may include:

· Trade marks

· Copyright (e.g. content, software, designs, marketing materials)

· Patents

· Design rights

· Know-how or confidential information

In return, the licensee typically pays a fee, royalty, or a combination of both.

Licensing can be an attractive growth strategy, but it must be carefully structured to ensure that control over the brand and its value is not diluted.

Why Licensing Can Be Commercially Powerful

When implemented strategically, licensing can:

· Create new revenue streams without significant capital investment

· Enable expansion into new territories or markets

· Strengthen brand visibility and recognition

· Facilitate collaborations and strategic partnerships

· Monetise underused intellectual property assets

For growing businesses in particular, licensing can be a scalable way to increase market presence while sharing operational risk.

However, commercial opportunity must be balanced against legal protection.

Key Legal Issues to Consider

1. Scope of the Licence

The agreement must clearly define:

· What intellectual property is being licensed

· Whether the licence is exclusive, sole or non-exclusive

· The territory in which it applies

· The permitted uses

· The duration of the arrangement

Ambiguity in scope can quickly lead to disputes. A well-drafted agreement ensures both parties understand the commercial boundaries.

2. Quality Control and Brand Protection

For trade mark licences in particular, quality control provisions are critical.

If a licensor fails to maintain adequate control over how its brand is used, it risks reputational damage and, in extreme cases, weakening its legal rights.

A robust agreement should address:

· Branding guidelines

· Approval processes

· Marketing standards

· Audit and inspection rights

3. Payment and Royalty Structures

Licensing agreements often involve:

· Fixed licence fees

· Ongoing royalties (e.g. percentage of revenue)

· Minimum sales thresholds

· Reporting obligations

4. Intellectual Property Ownership

The agreement must confirm:

· That ownership of the underlying intellectual property remains with the licensor

· How any improvements or derivative works will be treated

· What happens to branding and materials upon termination

Failing to address ownership and post-termination rights can create long-term commercial complications.

5. Termination and Exit Strategy

All licensing arrangements should include clear termination provisions covering:

· Breach

· Insolvency

· Failure to meet performance targets

· Reputational concerns

Berry Smith’s Bottom Line

Licensing agreements are not “standard form” documents. Whether you are licensing your brand to expand into new markets, entering into a collaboration, or reviewing terms presented by another party, the agreement should reflect your commercial objectives and protect your long-term interests.

At Berry Smith, our Commercial Team advises businesses throughout the licensing process. We support clients by:

· Drafting bespoke licensing agreements tailored to their business model

· Reviewing and negotiating proposed agreements

· Advising on trademarks and intellectual property

· Strengthening quality control and brand protection provisions

Our focus is not only on legal compliance, but on helping you maximise the commercial value of your intellectual property while managing risk effectively.

If you are considering entering into a licensing arrangement, or would like your existing agreements reviewed, our team would be pleased to assist. Please contact us at commercial@berrysmith.com or on 029 2034 5511 to discuss how we can support your business.