What You Should Know About a License Agreement

If you are the creator of a “product,” such as software, copyrighted images, videotape or film --  or any other original medium that you lend to others for a price, you should have a good license agreement in place. A license agreement primarily protects the copyright holder and/or patent holder from liability, as well as stating the specific terms of the agreement, such as how the product may be used, whether there are warranties as to its performance, and the length of time the license will be in effect.

The license agreement is primarily intended to minimize risk for the producer or owner of the product. A “license” to use a product, such as software, can entail a large computer network where many nodes will be sharing the code; a television broadcasting company that will be showing your work a certain number of times, or an educational system that will want to use your material to present to classrooms. In any of these cases, specific terms and conditions must be clearly spelled out in the license agreement.

Consideration for calculating your price for licensing might be:
The purpose your product will serve for the licensee, such as an educational, business or other function.

  • Whether your licensee plans to draw a profit from the use of your product.
  • How many people will benefit from the product; how much exposure it will get.
  • How many times it will be used, such as a film that is aired three nights, or a piece of software that is shared by twenty people for a year at a time.
  • Whether you will be providing technical support for the product.

The scope of the license agreement should define whether this will be an exclusive or non-exclusive arrangement, which addresses whether you are free license it to others simultaneously.

You may also want to take control, as licensor, of the licensee’s implementation of your product. For example, a software developer may wish to install the software himself as a way to ensure that it is set up properly and its users properly trained. With other forms of media this might not be necessary, but software in particular, since it can require a great deal of technical support, fits this scenario. This should be clearly set out in your license agreement, as well as any limits to technical support, warranties and other conditions of the licensing arrangement.
There is the issue in this kind of arrangement of who will undertake the most risk. In most cases, the licensee is responsible for loss, as well as any unauthorized use of the product.

In addition to the standard contractual agreements, the licensing agreement’s most important clause when it comes to intellectual property may be the confidentiality section. It is important to protect your trade secrets and proprietary information when licensing a product. For instance, your licensee must agree not to share any of your source code, or violate your rights to your trademark or copyright by using the material for any purposes other than the ones you have specified in your agreement.

The license agreement may seem complex because it is lengthy; however, it is fairly straightforward and is important enough to read in its entirety to avoid any misunderstandings during the period that your property is licensed.


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