Licensing is the granting of permission by one company to another company to use a specific form of its intellectual property under clearly defined conditions. Virtually any intellectual property a company owns that is protected by a patent, trademark or copyright can be licensed to a third party.
Licensing can be a very effective way of earning income, particularly for intellectual property-rich firms, such as software and biotech companies.
Licensing is a simple way for a manufactures to enter international marketing. It is a method of entering a foreign market in which the company enters into an agreement with a licensee in the foreign market. For a fee or royalty payments, the licensee buys the right to use the company’s manufacturing process, trademark, patent, or other item of value. The company thus gains entry into a foreign market a little risk; the licensee gains production expertise or a well-known product or name without having to start from scratch.
For example, AT&T and Verizon Communications have licensing agreements to build and operate parts of India’s telephone system. Licensing allows firms to use their technology in foreign markets without a major investment in foreign countries.
Licensing is an agreement between one company (the licensor) and another (the licensee) that permits the licensee to manufacture and market a product owned by the licensor.
Licensing is an agreement in which one firm (the licensor) allows another firm (the licensee) to sell its product and use its brand name in return for a commission or royalty.