Licensing agreements are a critical tool for businesses in the modern economy. They enable innovation, open new markets, and create additional revenue streams. However, creating a licensing agreement that adequately protects your interests can be a complex task.

In this guide, we'll explore how you can automate the process with our free licensing agreement template and win back time otherwise spent on routine contract admin.

What is a licensing agreement?

A licensing agreement is a legal contract between two parties that grants an individual or business (licensee) the right to use, produce, and sell goods, apply a brand name or trademark, or use patented technology owned by the licensor.

In return, the licensee usually submits to a series of conditions regarding the use of the licensor's property and agrees to make payments known as royalties.

Why use a licensing agreement?

Whether you're an inventor, a copyright owner, or a business with valuable intellectual property, a licensing agreement can offer you a way to generate revenue from your assets without having to produce or sell them yourself.

On the other hand, if you're a manufacturer or a business looking to expand, obtaining a license can give you access to innovative products or powerful brands that you don't have to develop from scratch.

This is common in industries such as technology, publishing, music, and franchising, where the use of another party's IP can accelerate business growth and innovation.

In return for allowing the use of their intellectual property, licensors receive compensation. This can come in the form of a lump-sum payment, ongoing royalties, or a combination of both.

What should a licensing agreement template include?

Licensing agreements can vary significantly in their content, depending on the specifics of the deal and the type of intellectual property involved. However, there are a few key provisions that almost always appear in a licensing agreement template:

• ‍Parties: This section identifies the licensor (owner of the IP) and the licensee (party authorized to use the IP).‍

• Scope of license: This defines the rights being granted, such as what the licensee can and cannot do with the IP, the geographic area in which they can operate, and whether or not the rights are exclusive.‍

• Payment and royalties: This outlines the compensation the licensor will receive for granting the license, whether upfront, as ongoing royalties, or both.‍

• Quality control and reporting: The licensor will usually want to set quality standards for how the IP is used, and may also require regular reports from the licensee.‍

• Term and termination: This sets out the duration of the agreement and the conditions under which it can be terminated.‍

• Warranties and indemnities: These are the legal protections for both parties, stating that they have the right to enter the agreement, and providing for what happens if things go wrong.

Understanding legal jargon in a Licensing agreement

When diving into the details of a licensing agreement, there are several legal terms that can be confusing. Let's explain a few of them in more user-friendly language now.

• ‍"Grant of License": This phrase refers to the section where the licensor grants the licensee the right to use the IP.‍

• "Infringement": This is the term used to describe a situation where someone uses the IP without the owner's permission.‍

• "Indemnity": This is a promise to reimburse the other party for specific types of losses or damages.‍

• "Sub-license": This is a license granted by the licensee to another party, allowing them to use the IP. Not all licensing agreements allow for sublicensing though.

Common mistakes made when creating licensing agreements

It's also worth recognizing some of the most common contract management mistakes made in the context of licensing agreements. This will helo you to avoid these costly errors and protect your interests

1. Insufficient protection of IP: Always ensure your intellectual property is adequately protected before entering into a licensing agreement.

2. Vague or incomplete terms: Be as specific as possible in defining the terms of the license to avoid confusion or disputes down the line.

3. Inadequate compensation structure: Ensure the payment or royalty structure adequately compensates for the value of your IP.

4. Neglecting to plan for termination: Always include a detailed termination clause that covers various potential scenarios.

5. Failing to involve legal counsel: Licensing agreements can be complex and involve substantial risk. Always involve a legal professional when drafting and reviewing the agreement.

However, one of the biggest mistakes that businesses and individuals make when creating and managing a licensing agreement is using a manual, admin-heavy process, like the one described below.

How to create a licensing agreement: the manual process

1. Contract drafting

Crafting a licensing agreement from scratch is a daunting task. It requires extensive legal knowledge and expertise to ensure the agreement captures all necessary terms and conditions. The manual contract drafting process can be error-prone, leading to ambiguity, inconsistent language, or missed clauses.

2. Version control and collaboration

Coordinating with multiple stakeholders, including legal teams, finance departments, and business units, can be challenging when each party provides input and revisions. Keeping track of multiple document versions and managing feedback can be an administrative nightmare, resulting in confusion and delays.

3. Contract Negotiation‍

Manual contract negotiation involves exchanging multiple drafts back and forth between the parties, often via email or physical documents. This process is time-consuming, prone to miscommunication, and can lead to lengthy delays as each party proposes revisions and counter-revisions.

4. Review and Approval‍

Legal contract review is critical to ensure the agreement aligns with the laws, regulations, and business objectives. Manual review processes can be cumbersome, requiring meticulous examination of each clause and term, leading to potential bottlenecks and prolonged turnaround times.

5. Signing and Execution‍

Obtaining wet ink signatures on the final agreement can be a logistical challenge, especially when parties are geographically dispersed. Coordinating signing ceremonies, shipping documents, and ensuring all parties receive executed copies can lead to delays and increased administrative burden.

6. Storage and Retrieval‍

Storing and organizing physical copies of licensing agreements can result in difficulties in retrieving and accessing critical information when needed. Searching through filing cabinets or stacks of documents for a specific agreement can also waste valuable time and resources. Often, a better, more organized approach to contract storage is needed.

7. Post-signature contract management

‍Manually tracking key dates, payment obligations, renewals, and compliance requirements across multiple licensing agreements can be overwhelming. This process can result in missed deadlines, overlooked obligations, and potential legal and financial risks. These same problems persist even after the contract has ended.

How to automate the licensing agreement process

Fortunately, there's a faster and more efficient way to create Licensing Agreements. You can automate them. Modern businesses are increasingly turning to contract management platforms like Juro to streamline the way they create and manage licensing agreements.

1. Create licensing agreement templates

Businesses can generate licensing agreements in seconds using automated contract templates. Creating standardized templates in Juro allows your legal team to define and revise the terms and conditions of the agreements without having to draft each agreement from scratch.

Instead, commercial teams can self-serve confidently from these automated templates, simply populating them via a Q&A workflow or an integration with other business systems like Salesforce or HubSpot. These templates serve as the foundation for generating licensing agreements quickly and consistently.

2. Streamline negotiation

Instead of going back and forth with manual contract redlining processes in Word and email, Juro users can negotiate the terms of their licensing agreements from within their browser. All changes and comments are tracked in real-time, improving efficiency and reducing the risk of miscommunication. This collaborative environment simplifies the negotiation process, enabling businesses to agree contracts up to ten times faster.

3. Sign documents electronically

Once the Licensing Agreement has been finalized, parties can sign it electronically using Juro's built-in eSignature capabilities. This eliminates the need for printing, scanning, and physically mailing or emailing documents. Signing electronically within Juro ensures a seamless and secure signing process. Electronic signatures created in Juro are legally binding and fully compliant with laws such as eIDAS, the ESIGN Act and UETA.

4. Store contracts securely

Businesses that use Juro to generate their licensing agreements can also streamline post-signature contract management tasks. After signing, the fully executed licensing agreement is automatically stored in a secure, centralized contract repository. This cloud-based storage ensures easy access to agreements whenever you need them, without the hassle of searching through physical files or multiple folders.

5. Track contracts in Juro

Contracts created in Juro are built as structured data, making the data within the licensing agreement fully searchable. Juro offers OCR-enabled search functionality, customizable contract dashboards and automated contract reminders for key dates, making it easy to query, track and monitor your licensing agreements at scale.

By automating the process used to create and manage licensing agreements, you can reduce manual effort, improve collaboration, enhance compliance, and achieve greater efficiency in managing your licensing relationships.

Automate licensing agreements with Juro

Licensing agreements can prove extremely profitable. However, they process of creating them can be costly in terms of time and resource.

Fortunately, you can cut the pain and friction usually associated with creating and managing licensing agreements by using Juro.

Juro's collaborative, flexible and data-rich contract management platform makes it quick and easy for teams to generate licensing agreements while also minimizing risk. To find out more, hit the button below for a personalized demo.