25 Brand Licensing Key Business Terms
Welcome to our guide on brand licensing!
If you’re new to this concept, don’t worry – we’ll break down some key terms and definitions for you. And if you’re familiar with brand licensing, consider this a refresher course.
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Brand Licensing: The process by which a brand owner extends its intellectual property (IP) to a third party, allowing them to create products or services under the brand’s name.
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Licensor: The owner of the brand, character, or trademark who grants the license to a third party.
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Licensee: The third party who acquires the rights to use the brand, character, or trademark in the production and sale of goods or services.
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Royalty Fee: A payment made by the licensee to the licensor for the use of the licensed property, usually calculated as a percentage of sales.
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Trademark: A symbol, word, or words legally registered or established by use as representing a company or product.
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Intellectual Property (IP): Creations of the mind, such as inventions; literary and artistic works; and symbols, names, and images used in commerce.
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Copyright: A legal right that grants the creator of an original work exclusive rights to its use and distribution, usually for a limited time.
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Brand Equity: The value a brand adds to a product or service, reflected in how consumers think, feel, and act with respect to the brand.
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Co-Branding: A marketing partnership between at least two different brands of goods or services.
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Exclusivity: A licensing agreement term in which the licensor restricts the license to only one licensee, typically within a specific geographic area or product category.
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Territory: The geographic area in which the licensee is authorized to produce or sell the licensed products.
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Product Category: Specific classifications of products or services to which the license applies.
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Sub-Licensing: When a licensee grants some or all of their licensed rights to another party.
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Brand Extension: Expanding the brand to new products, categories, or markets beyond its current product lines or services.
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Minimum Guarantee: The minimum amount the licensee agrees to pay the licensor regardless of sales.
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Royalty Audit: An examination of the licensee’s sales records to ensure accurate royalty payments.
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Style Guide: A set of standards and guidelines provided by the licensor for the appropriate use of their brand, including logos, colors, fonts, and other branding elements.
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Merchandising Rights: The rights licensed that allow the licensee to produce and sell merchandise based on the licensor’s property.
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Cross-Merchandising: A retail practice where licensees market products related to their licensed products to drive sales of both.
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Renewal Option: A clause in a licensing agreement that allows the licensee to continue the agreement after the initial term has ended.
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Infringement: The violation of the licensed rights, such as producing unapproved products or selling in unauthorized territories.
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Advance: An upfront payment made by the licensee to the licensor, often applied against future royalties.
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Distribution Rights: The rights granted to licensees to sell a product in particular channels or retailers.
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Licensing Agent: An intermediary who facilitates the licensing agreement between a licensor and licensee, often for a commission or fee.
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Brand Valuation: The process of estimating the total financial value of a brand.
These terms provide a fundamental understanding of the intricacies involved in brand licensing, a common practice used to expand brand reach and generate revenue.
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