How Many People Does it take to Screw in a Trademark Licensing Agreement
August 9, 2001
Because so many brand owners fail to appreciate how important licensing can be for their brand, many of those who do license choose to license cheaply. Licensing cheaply usually means paying people too little, or paying too few people, to do it well. It is important for brand owners to learn (eventually) the importance and role of licensing in building and managing a brand, but it is important for them to recognize (now) that a licensing program must be staffed both professionally and adequately.
How many people does it take to develop a licensing plan, prospect for potential licensees, negotiate and close deals, manage product development, keep licensees accountable, and integrate (where possible) the licensing program with the brand’s marketing mix? Read on.
Internal and External Management
The choice, as many brand owners seem to think, is not between whether to manage trademark licensing internally or externally. The choice is getting the right input from the right number of people – a large number of people – on each of whom the success of the trademark’s licensing program will depend.
Successful licensing requires both a person, department or organization focused on coordinating the internal elements of the licensing program and a person, department or organization focused on managing its external elements. Combining those functions in one role will hurt either the internal oversight or external results, both of which need to be optimized for success.
The Internally Focused Players
This person should coordinate the development and production of all branded products, whether sourced internally, developed by partners, or licensed and will be responsible for their consistency with brand management and trademark protection. This person can oversee the licensing deal-making but do that work. Primarily a program manager, this all-important employee is a licensing coordinator rather than a licensing entrepreneur.
The brand owners needs either in-house or outside counsel capable of addressing trademark protection within the context of branded product development. Many IP attorneys know trademark law; not so many are good at advising their clients how strict trademark protection (and ambitious registration) can accomodate creative and profitable deal making. The brand owner should authorize its brand/licensing managers to teach this lawyer if she doesn’t understand both sides of that equation – or to hire a new attorney.
Few players are more important to successful licensing, yet they are often ignored in the process, or left off the team. Brand managers must support licensing – and must be taught to do so if necessary. In exchange for their support they must be allowed to approved of licensed products, but the buy-in that results will be worth this effort for all involved.
Internal or external graphic designers will develop and modify logos and brand artwork for merchandise.
The Externally Focused Players
Consultant on Licensing Plan
An outside consultant is often the best person to help a brand owner think about how branded products and licensing should fit within its brand management and internal operations. Whether a company has been licensing its brand or not – and however it has developed ancillary products – working with such a consultant will straighten its thinking and work or correct its past mistakes.
Deal-Maker and Deal-Managers
This position can be filled in-house (by someone other than the IP manager), outside the company (by an agent) or by a combination thereof. Everyone who does this work needs to be creative, entrepreneurial, immersed in the brand, and sensitive to product development in the existing marketplace.
The Other Side
A licensee is a full member of the licensing team and must share many of the qualities of its partners. It must be great at understanding the brand; at developing new products; at making, selling and distributing those products; and at listening, and reporting accurately, to the brand. In return, the licensee must be treated as an indirect member of the brand team, and its work must be integrated as much as possible into the brand’s marketing mix.
No one likes to deal with more lawyers than necessary, but in any contractual transaction both parties will do better the more they understand exactly what they’re getting into. A licensee’s counsel, like a licensor’s counsel, must give a lot of weight to its client’s desire to do the deal it has been hired to review, and must concede that its client will have the weaker hand in negotiating for a license it badly wants.
But a licensee’s counsel can also help the parties end up with the licensing agreement that makes the most sense for both parties. Over-eager licensees will often sign agreements they can never satisfy, and no one benefits from an agreement with which the parties cannot comply; a lawyer on both sides can prevent that result. Even powerful licensees may fixate on the deal terms and miss the non-financial provisions that will ultimately be the most important to both parties. There are not enough good licensing attorneys in the world, but their numbers will increase as the industry grows, and their involvement on both sides of most deals will be worth their time and expense.
Although the cast of characters listed above indicates that a minimum of seven people are required for successful licensing, the point of this article is not that actual count. The point is that no company can carry out a real licensing program without building a team qualified to execute its many and disparate pieces. An internal licensing manager is not enough; an internal licensing manager plus a licensing agency is not enough; and an internal manager plus a licensing agency plus a brand manager only begin to fill out that team. A trademark owner must be prepared to fill out that roster fully before it can build a licensing program worthy of its brand.
From the August 2001 issue of The Licensing Letter