QUESTION
How much effort to put into a product licensing/distribution agreement
Asked on Aug 14th, 2012 on Intellectual Property - California
More details to this question:
Is there a recommended amount of money that should be put behind a product licensing/distribution agreement between a new U.S. based hobby product maker (licensor), and an individual in the EU (licensee) that wants exclusive distribution in his country? Both the licensor and licensee are new in the manufacturing and retailing business, but are established in the hobby. It''s unclear how many retail hobby stores are in the licensee''s country, or what web orders he might achieve, but for comparison in the U.S. there are 3000 such stores.
The question is, would a template agreement be recommended in such a case, maybe keeping the term short so as to minimize risks? Or is there a monetary value (such as the licensee''s advance fee), that if great enough, an attorney should draft an agreement?
1 ANSWER
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Regardless of the size of the up-front commitment, an attorney should be employed to draft the agreement. The reason for this is simple: mistakes last forever, and you can be paying for them long after the initial product relationship has ended.
It is very difficult to answer these kinds of questions in a vacuum, and the questions are even more difficult when neither the licensor or licensee has any economies of scale as a result of other products or other distribution channels in which they are operating. The chances of failure are overwhelming when both parties are novices and neither has any established distribution channels or manufacturing.
That having been said, nothing ventured, nothing gained. If you want to discuss the specifics, you should consult an attorney who practices in the area of licensing and franchising. Feel free to contact our offices at (203) 399-1320 if we can help.
Answered on Aug 15th, 2012 at 7:58 AM