INDUSTRY SERVICES MONTH: Key points for brand owners

It is often easy to overlook the fact that a significant proportion of the licensing industry is underpinned by service relationships between brand owners and licensing agents.
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Brand owners will often have invested significant amounts of money, time and emotion in the development of their brand; licensing agents offer them an expert service in managing the next steps of the brand's development and the sourcing and exploitation of revenue.

At the more sophisticated end of the licensing industry these two roles are often combined – "end-to-end" brand owners will, with the licensing potential in mind, specifically create brands for exploitation by their internal sales teams. But for a smaller brand owner, starting out in the industry, the process may be fraught with danger – get this relationship wrong and the brand will go nowhere.

What then are the key points that a brand owner should be looking to cover when engaging a licensing agent? The following suggestions are only starting points, as each situation demands different solutions, and will be obvious to many – but for brand owners taking their first steps the basic protections can often be forgotten in the rush to sign…

• If you are sharing sensitive brand information and plans with the agent you should ensure that they enter into a confidentiality or "non-disclosure" agreement. Whilst these agreements require careful drafting in order to be fully effective, such a request signals your intent to the agent early in your relationship and will help to ensure that they treat this information with the same level of care that you do.

• Wherever possible try to secure a minimum element of income to be delivered by the licensing agent by negotiating a minimum advanced guarantee. Additionally, in the current environment, and depending on your bargaining position, you should try to get any staged payments secured by a bank guarantee or a letter of credit.

• Incentivise the agent to maximise revenues. The last thing you want to be is a trophy client, acquired for the purposes of an agent's flashy website. By, for example, giving the agent a ratcheted increased revenue share, your interests are aligned. And avoid the temptation to keep the agent's take as low as possible – be reasonable, agents will often look to prioritise their portfolios and will focus on those properties where the rewards are greatest.

• If specific deliverables were discussed during negotiations, include these as milestone targets. These might include access to, or presence in, a specific retailer, or the securing of a deal in a particular product category – the reward might be an enhanced revenue share, or exclusivity for that market. Similarly, failure to secure these could result in a loss of exclusivity or that product category.

• Retain sign-off for key approvals and proposed deals. This is particularly important during the early stages of the relationship when both parties will go through the process of aligning interests and objectives. It can be cumbersome and sometimes inconvenient but will stop significant effort being channelled in the wrong direction.

• Ensure that key staff are dedicated to your account. You may have developed a good relationship with a particular member of the agent's team and feel that they understand your brand's values and direction.

• Establish whether your intellectual property is adequately protected – do you actually have the rights to license? Before embarking on any licensing programme you should ensure that you have registered any relevant trade marks and checked that the product classifications cover all proposed licensing categories.

• Similarly, if copyright works (artwork, books, broadcast content etc.) form part of your brand then ensure that you have either full licensed or assigned rights from the creator – if someone is engaged as a consultant the copyright to their work remains with them (even if it was commissioned by you) unless their contract specifically provides otherwise. Domain name registrations should also be checked as an online presence is often vital, if only for defensive purposes.

Your relationship with a licensing agent is just like that with a licensee; whilst it is a bit of a ripe old cliché it is still valid nevertheless - the more solid the foundations at the outset, the more likely that it will prove to be a long and rewarding experience.

Stuart is an associate in the Media, Communications and Technology Group of Olswang, a leading business law firm. He regularly advises on the acquisition and licensing of sports and brand marketing rights and prior to joining Olswang he was director of legal affairs at an international brand licensing agency.

He can be contacted by clicking here or by calling +44 (0) 20 7067 3000.

This article does not represent legal advice that should be relied upon, or for which responsibility is accepted by the author, his firm or Licensing.biz.

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