What is licensing

Licensing is a license agreement, which allows one company to grant another company the right to use a patent or trademark that enables the production of a product, or simply have the right to market it, through the payment of a fee.

This contract allows for rapid entry into new markets without having to invest additional entry costs and includes two parties: 

• The licensor (licensor): the party that transfers the license;
• The licensee (licensee): the party to whom the license is entrusted. 

Thanks to licensing, the licensor still retains ownership of the business but grants the licensee the right to exploit the company's sales expertise. 

Types of Licensing

There are three types of licensing that a company can acquire:

• Licensing-in: type of licensing where the company acquires essential knowledge from outside for its own business;
• Cross-Licensing: a type of licensing in which the company already has the knowledge, but cannot use it in its business activities because the use is prevented by the existence of a third-party patent;
• Licensing-Out: also known as "out-licensing", it involves granting licenses with the purpose of providing the company with additional income, which comes from the manufacturing and sale of products.

Licensing is a very popular method for the economic exploitation of a property title. A company's entry into a foreign market is based on several marketing strategies that the company studies for selling its products.

Main features of the licensing contract

Thanks to the licensing contract, the company exploits all of the firm's properties from an economic point of view, and especially acquires the sales rights of a product. 

To do this, it is necessary to define the terms related to the license agreement between the licensor and the licensee; typically, the contract lasts for three years and must specify the characteristics that the contract includes: 

• Who the parties are and the duration of the contract;
• The consideration that the licensor is entitled to receive through royalties (the right of a patent owner or property owner to be paid a sum of money by anyone who exploits these goods for commercial purposes);
• The terms for terminating the contract and any restrictive clauses; 
• All cancellation procedures to be implemented if the licensee fails to fulfill the tasks assigned by the company. 

Examples of licensing

The fashion industry is the most utilized in terms of licensing practices, with the increase of this contract, many brands have doubled their production, entering new market segments.

Here are some examples of licensing:

Angelini Beauty

Angelini Beauty is the business unit of the Angelini Group, which operates in the perfumery and cosmetics sector. Between 2013 and 2016, the brand included in its portfolio numerous prestigious names from the fashion system. Among these we recall Laura Biagiotti, Trussardi, Gianfranco Ferré, and Blumarine.

EuroItalia

It is a family enterprise and is a leader in marketing the finest Italian fragrances. EuroItalia collaborates with maison

 and designers to anticipate market trends and turn them into successful fragrances to be marketed worldwide. Among the major fashion brands present in its portfolio we recall Versace, Missoni and Moschino.