Licensing Terms

Below are 100 Licensing Terms Every Inventor or Entrepreneur Should Know.


An advance is the money paid by a licensee to a licensor, due upon signing of a license agreement.  Most of the time, advances are nonrefundable and are taken out of future earned royalties.

Approval Process

Authorization that a licensor gives to a licensee to go ahead with the manufacture and distribution of licensed products.


When the licensee assigns an agreement, a new business will sell the licensor’s product and pay them royalties. This new business takes the place of the original licensee.

Audit Rights

Audit rights are the permission that a licensor receives to check that royalty payments, financial statements, accounting data, warehouse and inventory are accurate.


Brand is a line of products or an individual product that is identified by a name or logo. This name or logo may or may not be a registered trademark.

Brand Acquisition Licensing

Using another company’s marks, licensed property or brand in return for royalty or fee.

Brand Equity

Brand equity is the unique qualities of a brand that makes a consumer loyal to a product or service.

Brand Extension

Using a brand’s name and identity from its existing products in association with new products.

Brand Identity

Brand identity is a brand’s name and visual appearance that makes it identifiable by consumers and different from other brands.

Brand Image

Brand image is the perception customers have of a certain brand or the opinion they have of a brand through actual experience with products and services associated with a certain brand.

Brand Owner

Brand owner is a person or business that owns a mark and gives the rights to use such a mark to licensees developing a licensed product.

Brand Representation Licensing

When a brand owner gives manufactures the right to produce, market and sell products that use its brand name or logo in a manufactured product in return for a royalty fee.

Breach of Contract

A breach of contract happens when a license agreement is not respected and one of the parties does not fulfill their contractual obligation.

Co-ownership or Joint Inventor Agreements

This agreement is executed between the owners – usually the creators – of an invention. It establishes the rights and obligations of each party in respect to the invention. A co-ownership agreement may establish which owner has the right to enter into licensing agreements and may require a mutual decision when it’s time to decide upon a licensee.

Distribution Channel

Retailers that sell licensed products. Such retailers include department stores, specialty stores, Internet, mail orders and others.

Class of Goods

This is a term the patent office uses to classify goods when filling a trademark.

Collateral Materials

Sell sheets, licensee sales presentations and advertising materials developed by licensee and approved by licensor.

Common Marketing Fund

A financial account funded partially or completely by licensee to support advertisement and promotion of a licensing program.


Copyrights are legal rights given by the government to the owner of an original work of authorship. Such rights give the owner the ability to control publication, reproduction and distribution of their work. Copyrights are usually used to cover art, music and written works.

Copyright Infringement

Use of a copyrighted work without authorization. Such use can result in criminal penalties.

Copyright Mark

Symbol used to show that a work is under the protection of a Copyright.

Corporate Identity

Logo, design, colors, and design that bring together the identity of an organization.


A guaranteed royalty divided across several channels of distribution.

Distribution Grant

List of retailers or distribution channels where licensed products have authorization to be commercialized.

Distribution Start Date

Beginning date when licensed products can be delivered to retailers.


Company that buys licensed products from licensee and sells them to approved retailers.

Earned Royalties

Licensee pays licensor earned royalties by multiplying the net sales by the sales of all licensed products. With earned royalties, guarantees and advances are not subtracted. However, paid royalties would include both earned royalties and guarantees and advances.

Evergreen Property

A property with a licensing program in place for several years, producing royalties regardless of the state of the market. Examples of evergreen properties are Star Wars, Sesame Street, etc.

Exclusive License

A license agreement that gives the right to develop the licensed product to only one licensee.

F.O.B. (Freight On Board)

This term refers to the point at which the licensee sells the product and the royalites are calculated. If a licensing contract’s royalty rate is calculated on F.O.B China, you would earn less than if it were F.O.B USA because shipping and other costs have not been added to the cost of the product yet.

Grant of Rights

When a brand owner gives authorization to use their brand in association with the manufacture of licensed products.

Gross Sales

Number of sales achieved by multiplying all licensed products units sold by the wholesale sales price, before any deductions are calculated.


Number that represents the minimum royalty payment that a licensee has to pay a licensor specified in a contract.


Business or individual that makes use of the copyrights, patents or  trademarks of another without previously obtaining authorization to do so.


An injunction is a court order directing a person to do or stop doing something. In the case of trade secrets, it would be a court order directing the company to stop using your secrets. Normally, as the inventor seeking the injunction, you must be able to demonstrate that you have suffered an irreparable harm as a result of a company’s using your secrets.

Initial Term

Initial period of time when a licensor gives the licensee the right to use their licensed property.


Amount required by licensor that licensee must have in order to sell licensed products. Product liability insurance requirements usually state minimum amounts for the limit of liability and the deductible.

Letter of Intent

After agreeing to the essential business terms, a licensee may prepare and sign a letter of intent. The letter of intent sets forth the essential terms and establishes a date when the parties plan to enter into a license agreement.

Licensable Assets

Materials such logos, brand names, marks, designs and others owned by licensor that licensee is authorized to use on licensed products.


License is the authorization to use a piece of intellectual property within a defined term, channels of distribution or territory.

License Agreement

Contract between licensor and licensee that gives the right to use the licensed product in return for payment; usually a royalty based on wholesale sales.

Licensed Products or Articles

Items using the licensor’s brand name, logo or mark that licensee is allowed to develop, manufacture, market and sell.

Licensed Property

Property such as brand, copyright or mark owned by licensor and given to licensee for use in the development and sale of licensed products.


Business to whom a license is given by a licensor, to have the right to use licensed property for development and sale of licensed products.


Act of giving companies the right to develop, manufacture and sell licensed products via approved distribution channels in exchange for payment; usually a royalty based on wholesale sales.

Licensing Agent

Business that develops and manages licensing programs for licensors and manufacturers or licensees. The licensing agent primary role is to bring the two parties together to close license agreements in exchange for a percentage of the royalties.

Licensing Application

A form the licensee fills out that includes a companies plans for the licensed property. This information can be used by the licensor to asses a licensees potential.

Licensing Out

Licensing-out means to give patent licenses to other companies. One example is to sell the rights for other companies to use your technologies. 

Licensing In

Licensing-in means to agree to licenses on patents or products that belong to another company or individual.

Licensing Program

Group of all licensing activities regarding a licensed property.

Licensing Theme

Sub-programs under a larger licensing program, used to generate increased sales and interest.


Business or person that owns the rights to licensed property and gives licensee the rights to develop, manufacture, market and sell licensed products.


Business that develops and sells licensed products. Also known as licensee.

Marketing Requirements

Requirements that the licensee must perform under such as presenting at a trade show or performing certain advertising functions.

Marketing Royalty

Percentage of licensee’s wholesale sales used to market and promote licensed products.

Mass Market

Channels of distribution represented by a few large retailers that can reach a large number of consumers.

Net (Wholesale) Sales

Number that represents sales and is achieved by taking wholesale sales and subtracting allowed deductions such as returns or freight.


A nondisclosure agreement is a document where you agree to keep confidential certain information.


In order to be novel, an invention must be different from the publicly known or existing knowledge in the field of the invention. A patent will not be issued if the invention was known or used by others in the USA, or patented or described in a printed publication in this or a foreign country, before the date of invention.

One-Sheet or Sell Sheet

One-page document used to promote a licensed property disclosing its benefit statement and showing why a licensee should be interested in acquiring the license.

Option Agreement

An option agreement is essentially a contract to make another contract, if certain conditions are met. A licensee who thinks it may want to enter into a license agreement with you pays you a fee to keep the offer open while it makes its decision. In exchange for the payment, you agree not to enter into a license agreement with anyone else for a period of time – maybe six months or a year.


Total moneys of royalties paid to a licensor above the Guarantee.

Paid Royalties

Royalties that the licensee sends to licensor. Paid royalties figure is achieved by adding earned royalties to paid guarantees and advances.

Patent Pending

Patent rights don’t start until the patent is issued. Significant length of time may pass between a patent application and the issuance of the patent. This period of time is the pendency or patent pending period. The owner of a patent cannot keep any infringing activity that occurs during the pendency period unless the activity is still ongoing after the patent is issued.

Product Category

Group of related products that belong to a specific class, such as apparel, health and fitness, electronics, etc.

Patent Agent

A patent agent can do all the same work a patent attorney can do to write a patent, however they are not an attorney and can not litigate in court. 

Product Grant

Approved list of licensed products that licensor gives permission to be manufactured and sold.


Property is the licensed product or invention. You don’t license your invention, you license the intellectual property rights related to your invention.

Property Grant

Approved list of BrandsCopyrights or Marks that are given permission to be used in the development, manufacturing, market and sale of Licensed Products or Articles.

Registered Trademark

A protected mark made of words or symbols that is registered at the USPTO – United States Patent and Trademark Office.

Registration Mark

Symbol used to show that a Trademark is registered with the USPTO. This mark is a capital R with a circle around it.


This is the continuation of a licensing agreement into another term. This second term can be automatic or can be contingent on sales or other criteria.

Retail Price

Final price that a consumer pays to buy a licensed product.


Licensed products sent back from the retailer to the licensee for any reason. Usually there is a limit to the number of returns that a licensor will allow to be subtracted from wholesale sales.


Figure paid to a licensor by a licensee for the right to use a licensed property.

Royalty Rate

Usually a percentage of wholesale sales paid to the licensor by the licensee for the right to use licensed products.

Royalty Report

Document provided to the licensor by the licensee, usually once per quarter, showing the previous period’s wholesale sales, earned royalties and owed royalties.

Sell-Off Period

Period after the license agreement expires or is terminated when a licensee is allowed to sell remaining stock of licensed products.

Sell Sheet or One-Sheet

One-page document used to promote a licensed property disclosing its benefit statement and showing why a licensee should be interested in acquiring the license.

Service Mark

A service mark is a trademark, but for a service instead of a product.

Signing Bonus

A payment to a licensor by a licensee to buy the rights for licensed products. This payment is usually not credited against guarantees and in addition to advance payments.

SKU or Stock Keeping Unit

A specific number given to each unit of licensed product, used by licensee and retailers.

Strategic Licensing Plan

Document that outlines strategies and details of the licensing program, including a list of licensed products, channels of distribution and marketing plans.

Style Guide

A guide provided by licensor, giving information, creative direction and design assets to assist licensee in the development of licensed product. Style guides usually include color palettes, packaging guidelines, legal requirements and corporate identity information.

Sub Agent

A licensing agent hired by the primary licensing agent to manage a specific aspect of the licensing program.


A sublicense is similar to a sublease. A person acquires property rights and transfers the rights to someone else. Under a sublicense, the licensee can transfer its rights to a company who can make or sell your invention.


Copyright, registered trademark and trademark symbols.


Period of time specified in contract when a licensor gives the licensee the right to use their licensed products.


When your license agreement ends, a few common bases for termination are: termination based on a deadline, termination by choice, termination based on a problem originated in the agreement.


Geographic area, usually defined by country, where licensor gives licensee the right to sell licensed products.

Trade Dress

A visual look or feel of a product or product line.

Trade Name

Name of a business.

Trade secret

A trade secret is any information used in your business that gives you an advantage over competitors who do not know it or use it.


Identifying symbol or word and design of a product that distinguishes such product from products sold by others.

Trademark and copyright infringement

Unauthorized and illegal manufacturing of products with a brand name or logo of a trademarked product without the authorization of the owner.


United States Patent and Trademark Office – government agency that registers and provides protection to owners of patents and trademark.

Warranties and Indemnity

Warranties and indemnity function as a unit. A licensee relies on the licensor’s warranty. Indemnity is the licensor’s financial punishment if the warranty is false. When you provide indemnity, you agree to pay for their damages for certain situations. For example, if you indemnify a licensee against infringement, then you will have to pay the licensee’s damages (and legal fees) if the licensee is sued for infringement.

Wholesale Price

The unit price determined by licensee that a retailer pays to buy licensed products.

Wholesale sales

Number achieved by multiplying the total unit sales of licensed products by wholesale selling price.