While companies sometimes manufacture these items themselves, they can sometimes choose to have a manufacturer produce and market these products under their brands. In return for the use of their trademark, these companies charge a royalty to the manufacturer. Such an agreement is called a trademark license and can be defined as an agreement authorizing a company that markets a product or service (a licensee) to rent or lease a trademark by a trademark owner. The owner who manages a licensing program receives in return a portion of the proceeds of the sale (royalties). 1. Revenue from royalties. While this is usually not the primary reason, licensing generates revenue from warranty and license payments. Guarantees are usually set annually and calculated as a percentage of the planned annual fee. License payments are usually calculated as a percentage of wholesale revenue. As long as the trademark is protected, no general manager would refuse the healthy injection that these payments would bring for his final result. “The new licensing partnership between Cool Gear International and Coca-Cola will provide our brand with an exciting design complement,” said Donna Roth, President/CEO of CGI. “Both brands are iconic in American culture.” The move to Russia followed Coca-Cola`s signing with Merchantwise Licensing to revive licensing in Australia after a 3-4 year absence, and with Lisans for Turkey.

ELC also handles licensing in Eastern Europe. In Australia, fashion merchant Cotton On has launched a clothing DTR, while contracts for small devices (husky) and beauty products (Bonnie Bell) have been signed. 4. Business or market knowledge. By licensing their brand to a third party, a property owner can test new businesses or travel to new countries with less prior investment than setting up and running their own businesses. Since the manufacture and distribution of the product is carried out by the licensee – the company with product expertise – there is very little commitment on the part of the licensor with the product and there is no retention obligation. When I was working at Rubbermaid, we had a kitchen tableware license in a small area of Asia to see how well it would work. One of the most common misunderstandings is that the barriers to entry are high because it is difficult to contact the owners of the brand.

Many think that you have to be a company of a certain size and only the largest companies get the best licenses. But licensing is not inaccessible to smaller players as long as you prepare and create the right foundation. Manufacturers and distributors who wish to become licensed must decide whether entering into a licensing agreement is really a good thing for them. You should ask yourself: granting a trademark license offers huge benefits to both the trademark owner and the licensee, but more importantly, it allows consumers to purchase the desired products and services of the brands they love….