Many people ask CONSOR the question: what is licensing? In simple terms, licensing grants the right to a second party to use a trademark, patent, process or copyright for a given product or service, for a given period of time, in a specific territory.
The history of licensing dates back to the Middle Ages, when the Pope granted warrants or licenses to local entrepreneurs who collected taxes and forwarded a royalty percentage to Rome. Later, in the 1770s, two ladies of British royalty lent their name to a line of facial cosmetics in return for a royalty on sales (Royal Warrants originally were granted in return for a “royalty”).
Licensing in the 1930s, 1940s, 1950s and 1960s with Shirley Temple, Hopalong Cassidy, Howdy Doody and Davy Crockett. Not until the 1970s did we witness the emergence of licensing as a major industry. The successes scored by designer properties and properties such as Star Wars, Snoopy, and NFL Team merchandise, just to name a few, awoke corporate boardrooms everywhere to licensing’s potential.
Many get confused between licensing and franchising. The key difference between franchising and licensing requires testing for three factors:
- The granting of use of a name or trademark
- The receipt of a payment or fee
- The prescription of an operating system
If any one of these key factors is missing, then there is a License Agreement or simple contractual relationship, rather than a franchise. From a regulatory point of view, licensing is a vastly simpler area to operate in. Unlike franchising, licensing is virtually unregulated by federal and state laws.
Merchandising can include more than simple licensing; however, promotions, sponsorships, tie-ins, endorsements, joint promotions, and special events are all part of a well-developed merchandising program.
The last decade’s growth in licensing stems from the emphasis on corporate licensing, which includes brand and tradename licensing and institutional licensing; as well as lifestyle licensing. Consor will discuss corporate licensing in the next segment of Licensing Q&A.
If you have a question about licensing, leave your question in the comment section below and Consor will reply in a future Licensing Q&A article.