WHAT IS LICENSING?

Licensing is the process of leasing the rights to a legally protected ( trademarked or copyrighted ) entity. The entity — known as the property — could be a name, a graphic, a logo , a likeness, a saying, a signature or a combination of these elements.

The rights to a given property are granted for a specific purpose (usually for a product or products to be sold in retail stores), for a defined geographic area and for a limited time, in return for a negotiated payment.

The owner of a property is known as the licensor , while the renter of the rights (usually a manufacturer) is called the licensee .

The basic component of payment is the royalty , generally a percentage of the manufacturer’s selling price on every product sold. Contracts typically require a guaranteed minimum royalty payment, or a guarantee , a percentage of which licensees normally pay as an advance .

There are many variations in payment structures. In addition to merchandise, a property can be licensed for many nonproduct purposes. Examples include premiums , fast food or packaged goods promotions, television or print advertising, and services. Some licensors authorize their properties for entertainment vehicles, such as films, television series or live performances. A growing area for licensing is use on mobile media, as in cellphone wallpaper or webisodes.

For more about the business of licensing, see "The Licensing Business Handbook".