When one or both partners are not happy about the licensing agreement, nobody wins. If it isn’t a good deal for both parties, it won’t last. Eventually, either you or your licensing partner will feel shorted on the deal.
I’ve seen this occur in several cases, such as when a small company approaches a large one for licensing. One example is the entertainment industry, when a small company licenses a major entertainment property. Sometimes it’s a heavy-handed licensing agreement that puts the small company under aggressive performance milestones or royalty payment schedules. They end up unable to perform, and everyone is unhappy.
On the other side, I’ve worked with clients who were taken advantage of during the negotiations and wound up giving away “too much” in a deal. In one situation, two partners gave away exclusive rights to a company that wasn’t meeting the agreement performance milestones. Because the deal didn’t include the right termination provisions, they couldn’t get out of it. The partnership was going nowhere because it was not a win-win deal.
A license agreement is a long term lasting five years, 10 years, and maybe longer if it’s a patent agreement. That’s why it must be a win-win because you’re building on a partnership. If you and your licensing partner feel good about the license agreement, you will work together to make it a better and more profitable license agreement. That’s the goal, to make money with your intellectual property, which requires an agreement that works well for both parties.
One final point. Make sure the terms in your licensing agreement are clear, and you’ll avoid running into trouble down the road. And remember, it’s critical to work with a qualified IP attorney who will make sure that the terms of your licensing agreement protect your IP rights and creates a win-win for both you and your licensing partner.