A number of our successful clients use licensing arrangements to manufacture and/or distribute their proprietary technology, processes, business formats or products around the globe.
In some situations licensing may be preferred to franchising for the distribution of goods and services. In some jurisdictions, franchising may entail significant expense in the establishment of the necessary legal structure, documentation and registration. A license arrangement may be established at the outset, followed by a full-blown franchise arrangement, once the product or service is established and retained earnings will fund the growth of the system. Issues of payment structure, control, and certain tax issues are crucial to the determination of whether a license arrangement will escape application of relevant franchise legislation.
Licensors require the right legal structure (including a consideration of the relative advantages of joint ventures, partnerships, limited partnerships, limited liability companies, corporations and franchises). A successful agreement also requires a superior negotiating team. A successful negotiation should make the parties want to do business with each other more than they wanted to before the negotiation began.
Licenses and royalty agreements must be clear, understood by all parties, and a mechanism for securing payment must be available to ensure that the licensor or royalty holder will receive payment. Various securitization techniques and knowledge banking instruments are a must. Excellent documentation avoids disputes, while providing the maximum of protection in the event a dispute does arise. Superior documentation is also a pre-requisite to obtaining financing: sub-standard agreements will not pass muster with investor’s counsel.
In some cases, we have established federal or provincial cooperatives in order to exempt a client’s system from the application of franchise laws. Our firm prepared the materials and negotiated the only Ministerial exemption to be granted to any cooperative under the current Alberta Franchises Act.
A single license agreement may contain a combination of manufacturing agreements, marketing agreements, distribution agreements, guarantees, supply agreements, security agreements, licensing of proprietary rights to products, licensing use of copyrights, trademarks, and trade names.
Our experience in negotiating license agreements on behalf of our clients ensures that our clients achieve their personal and monetary goals, are paid with cash money, and place our client in the most advantageous position in the event of a dispute.