Licensing Agreement Checklist: What to Review Before Signing
Essential Licensing Agreement Review Checklist
A licensing agreement grants permission to use someone else's intellectual property — software, patents, trademarks, content, or technology. Whether you are the licensor or licensee, reviewing these terms carefully can prevent costly disputes.
Scope of License
- Is the license exclusive or non-exclusive? An exclusive license means only you can use the IP; non-exclusive means others can too
- What specific rights are granted? (Use, modify, distribute, sublicense, create derivative works)
- Are there field-of-use restrictions limiting how you can use the licensed IP?
- What territory does the license cover? (Global, national, regional)
- Are there channel restrictions (online only, retail only, specific markets)?
Financial Terms
- What is the royalty structure? (Flat fee, percentage of revenue, per-unit, tiered)
- Is there a minimum royalty or guaranteed payment regardless of usage?
- When are royalties due, and what reporting is required?
- Are there audit rights for the licensor to verify your sales figures?
- What happens to prepaid royalties if the agreement terminates early?
Intellectual Property Protections
- Who owns improvements and derivative works created during the license?
- Who is responsible for enforcing the IP against infringers?
- Does the licensor provide indemnification if the IP infringes a third party's rights?
- Are there quality control requirements for how the IP is used?
Term and Termination
- What is the license duration, and does it auto-renew?
- What are the termination triggers for each party?
- What happens to your products, inventory, or systems that depend on the IP after termination?
- Is there a wind-down period to transition away from the licensed IP?
When to Consult a Lawyer
Licensing agreements involve complex IP rights with significant financial implications. Consider having an intellectual property attorney review the scope, ownership provisions, and termination consequences before signing.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.