Below is a sample of a contract that you can review to get a feel for what you can expect. I will say that ever contract is different between companies and you are free to negoiate any type of terms you deem necessary. It is up to both parties to agree or disagree with those terms. This one is very short. It is not unusual for a contract to be twenty pages or more in length. It all depends on the detail involved in the terms. Always read and read again anything you are given. Ask questions about any points you do not understand and do not sign anything you are not comfortable with signing. It is always good to have a lawyer look over any document before you sign it. One of the worst things an Inventor can do is get overly excited about getting a licensing deal and just sign anything they put in front of you.
Disclaimer: THIS SAMPLE AGREEMENT IS PROVIDED FOR REFERENCE PURPOSES ONLY. THIS EXAMPLE SHOULD NOT BE USED WITHOUT FIRST CONSULTING AN ATTORNEY AS THE PARTICULAR MATTERS AND ISSUES COVERED BY THIS AGREEMENT MAY NOT APPLY TO THE USER. USE OF THIS EXAMPLE COULD SIGNIFICANTLY HARM THE USER AND ADVERSELY AFFECT THEIR LEGAL RIGHTS AND OBLIGATIONS IF USED WITHOUT PROPER LEGAL REPRESENTATION.
SAMPLE FORM OF LICENSING AGREEMENT
_________ an individual (INVENTOR ), and __________. (COMPANY), a ___________ Corporation, by execution of this agreement, have agreed to the following terms regarding the manufacturing & marketing of the ______________ known by INVENTOR as “______________” (Product) designed and developed by INVENTOR .
Marketing Rights
1.1 INVENTOR has conceived of and has made preliminary concept designs of the Product and INVENTOR and COMPANY shall collaborate on the final design and functionality of the Product. COMPANY shall however, make any changes to the design to enhance the functionality and to bring the Product to manufacture, as COMPANY shall determine in its sole discretion.
1.2 INVENTOR hereby grants COMPANY the exclusive worldwide manufacturing and marketing rights to manufacture, market and sell the Product.
1.3 COMPANY shall have the right to use any names, trade names, trademarks and tag lines it chooses, in conjunction with its manufacturing and marketing of the Product including but not limited to the name “____________”.
1.4 COMPANY will have the right to incorporate the COMPANY logo, and line “Distributed COMPANY.” into the packaging, Product and displays it uses in connection with the marketing of the Product.
1.5 The exclusive manufacturing and marketing rights granted in this agreement shall be assignable in the event COMPANY sells either its business or the shareholders of COMPANY sell the stock of COMPANY to a related or third party purchaser who intends to continue the business of COMPANY and abide by the provisions of this contract.
Manufacturing and Royalties Payable
2.1 INVENTOR has supplied COMPANY with concept design drawings and perspectives so that COMPANY may study and make modifications to the design in COMPANY’s sole discretion so that the Product mold can be manufactured and made, and Product can be mass produced.
2.2 COMPANY shall solely be responsible for selection of the molder and manufacturer of the Product. COMPANY shall solely be responsible for the manufacturing of the Product and shall manufacture all Product. INVENTOR acknowledges that COMPANY shall subcontract the manufacture to an injection molder and that such manufacture may take place overseas.
2.3 COMPANY shall be responsible for specifying the material specifications of the Product to be used in the manufacturing of the Product.
2.4 COMPANY shall pay INVENTOR (on behalf of INVENTOR and Roger Brown), a royalty (Royalty) equal to 4.0% (Four Percent) of COMPANY’s Net Sales of the Product. COMPANY’s Net Sales of the Product shall be defined as COMPANY’s gross sales dollars collected from sales of the Product (excluding shipping costs incurred and sales taxes if any) to its customers, less any returns, charge backs and or bad debts. Royalties shall be paid quarterly within 45 days of the end of the quarter to which the Royalties relate.
Exclusivity and Performance
3.1 Because COMPANY will be changing the design of the product materially enough from its initial design as submitted by INVENTOR, COMPANY will maintain its exclusive rights to manufacture, market, distribute and sell the Product so long as COMPANY pays INVENTOR the royalty in 2.4 above, with no Minimum Performance requirement :
Patents
3.1 INVENTOR represents and warrants that to INVENTOR ’s knowledge, the Product as designed does not infringe on any other patent or intellectual property owned by any other person.
3.2 INVENTOR has not filed a provisional patent application and hereby grants COMPANY the right but not the obligation to do so, to be determined in COMPANY’s sole discretion. COMPANY may use and quote such patent application and any patent number granted there from, in conjunction with its manufacturing, marketing and sale of the Product.
Non-Competition
4.1 INVENTOR agrees that for so long as COMPANY is manufacturing and or selling the Product and paying INVENTOR Royalties from the sales of the Product, INVENTOR and any affiliated entities connected to INVENTOR will not assist, nor collaborate with, nor sell a similar or competing product in competition to COMPANY.
4.2 In the event COMPANY elects not to, or to discontinue manufacturing or marketing the Product because it is no longer profitable or feasible for COMPANY to manufacture or market the Product, COMPANY shall give INVENTOR at least 30 days written notice thereof.
Other
5.1 INVENTOR is the developer, inventor and originator of the original design as submitted and has unencumbered ownership of the design and product invention and is authorized to grant the manufacturing and marketing rights in this Agreement. Additionally, INVENTOR represents that he is not aware that The Product infringes upon or violates any other person’s design and or patent and indemnifies COMPANY against any loss, cost or expense as a result of any such violation and / or infringement. Furthermore, INVENTOR represents that he has not used a broker in connection with this agreement and or arrangement and owes no introductory or finders fee to any person in connection herewith.
5.2 INVENTOR has not entered into any other marketing agreement giving any other party any rights to market the Product.
5.3 COMPANY will use its best efforts to market and sell the Product, and INVENTOR acknowledges that COMPANY can make no guarantees that the Product will sell.
5.4 Any notices required under this Agreement shall be in writing and sent certified mail, return receipt requested to:
INVENTOR Chairman
_____________________. __________, Inc.
_____________________ Address
_____________________ Address
Fax: _________________
5.5 This Agreement constitutes the entire Agreement between the parties and all prior Agreements (either written or verbal), if any, are null and void.
5.6 This Agreement shall be construed and governed in accordance with the Laws of the State of ______________ and in the jurisdiction of __________________.
5.7 Each party has had the opportunity to have its own legal counsel review this Agreement.
5.8 INVENTOR is acting as an independent contractor and is not an employee of COMPANY and is responsible for its own tax filings and taxes. COMPANY will not deduct any income or other taxes in connection with the payments made to INVENTOR. INVENTOR ’s Social Security number is: _______________________
5.9 Facsimile copies with the parties signatures will be accepted and treated as if they are originals.
Signed and agreed to:
_____________ _______.
(an Individual) Chairman
