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Licensing Terminology

This glossary is intended to provide a general understanding of the key terms used within the business of trademark and brand licensing. The definitions that follow may apply to other industries but are not intended to do so. All definitions are written for the layman's viewpoint and not from a legal standpoint.

Click on any word or expression to read a definition.

• Advance or Advance Payment
  The initial guarantee paid by a licensee to a licensor, due upon execution of a license agreement. Advances are typically nonrefundable and credited against future earned royalties.
• Approval Process
  An established method by which a Licensee obtains authorization from a Licensor, or licensor's agent, to move forward with the manufacture and distribution of Licensed Products, packaging, advertising, sales materials, or other Collateral Materials based on submitted designs or samples.
• Audit Rights
  The permission for a Licensor, or licensor's agent, to review Royalty Payment, financial statements, accounting data, warehouse and inventory, financial systems and procedures, or other pertinent licensing information to verify accuracy.
• Brand
  A name or symbol used to identify a product, or line of products, typically registered or trademarked registered or trademarked trademarked with the US government through the USPTO. Brands signify that all goods bearing the mark come from, or are controlled by, a particular source and are of an equal level of quality. Brands also serve to advertise, promote, and generally assist in selling goods.
• Brand Acquisition Licensing
  Leveraging another company's well-known marks, brands or licensed property in the manufacture of products in exchange for a fee, typically a royalty, paid as a percentage of wholesale sales.
• Brand Equity
  The distinguishing qualities of a Brand that result in a consumer's commitment to, demand for, and expectations of, the product or service.
• Brand Extension
  Leveraging a brand's name, recognition, Equity, Image and Identity associated from its core product, to enter into new products.
• Brand Identity
  The outward expression of the Brand, including its name and visual appearance, that serves as the brand's fundamental means of consumer recognition and symbolizes the brand's differentiation from competitors.
• Brand Image
  The customer's perception of the Brand based on experience with the product or service and how well it meets expectations. For non-customers, Brand Image is based almost entirely upon uninformed impressions, attitudes and beliefs derived from marketing, advertising, packaging, and point-of-purchase materials and word-of-mouth of both core and licensed products.
• Brand Owner
  The company or individual, who owns a Mark, and grants the rights to use such marks to Licensees for the development of Licensed Products.
• Brand Representation Licensing
  A Brand Owner's enlisting of manufacturers to produce, market and sell approved products bearing its brand name, logo, or Mark and/or its Licensable Assets in exchange for a fee, typically a Royalty, paid as a percentage of Wholesale Sales.
• Channels of Distribution
  See Distribution Channels.
• Class of Goods
  The classification system by which all goods and services included in Trademark applications filed with the USPTO are assigned and categorized.
• Class of Trade
  See Distribution Channel.
• Co-Branding
  The use of two or more brand names in connection with one product to create a multi-branded product. Co-branded License Agreement typically yield lower Royalty Rates and less control for the Licensor.
• Co-Op Fund
  See Common Marketing Fund.
• Collateral Materials
  Sales and marketing materials, developed by a Licensee and approved by a Licensor, that support a Licensing Program including: One-Sheets, licensee sales presentations, advertising or point-of-sales displays.
• Common Marketing Fund
  A Licensor managed financial account funded at least in part by Licensees that is used to advertise and promote the Licensing Program. Also referred to as a Co-Op Fund.
• Copyright
  The exclusive legal rights granted by the government to the owner or holder of an original work of authorship (typically art, literature or music) that allows the owner or holder to control the publication, reproduction, distribution, adaptation and performance of such work.
• Copyright Infringement
  The unauthorized use, or duplication, of a Copyrighted work, which can result in civil and/or criminal penalties to the infringer.
• Copyright Mark, ©
  The symbol used to denote that a work is protected by a Copyright.
• Corporate Identity
  The visual representation of an organization, including its logo, design, typefaces and colors, as well as its philosophy.
• Cross-Collateralization
  When a guaranteed Royalty is spread across multiple products or Channels of Distribution.
• DIME^®
  Perpetual's proprietary Trademarked process for the development of a strategic Licensing Program (Development, Implementation, Management, Evaluation).
• Distribution Channel
  Categories of retailers where Licensed Products or Articles are sold including: Mass or Mass Market, department stores, mid-tier, specialty stores, toy stores, bookstores, drug stores, supermarkets, internet, catalogs/mail order and others.
• Distribution Grant
  The contractually approved list of retailers, or Distribution Channels where Licensed Products or Articles are authorized to be sold.
• Distribution Start Date
  The date specifying when Licensed Products or Articles can be delivered to retailers for sale to the public.
• Distributor
  A business that purchases Licensed Products or Articles from Licensee and sells to approved retailers within the Channels of Distribution.
• Earned Royalties
  The Royalties that are owed to Licensor by Licensee computed by multiplying the Royalty Rate by the Net (Wholesale) Sales of all Licensed Products or Articles. Earned Royalties differ from Paid Royalties in that Guarantees and Advances are not subtracted. Earned Royalties + Guarantees and Advances = Paid Royalties.
• Evergreen Property
  A property whose Licensing Program has been in existence for many years and yields Royalties regardless of the state of the market. Evergreen Properties include: Peanuts, Mickey Mouse, The Muppets, Harley-Davidson, etc.
• Exclusivity/Exclusive License
  A License Agreement grant that permits only one Licensee the right to develop the Licensed Property for a particular Product Category, Distribution Channel, and/or territory; when a Licensor agrees not to grant other licenses of the same rights within the same scope covered by the exclusive license.
• F.O.B. (Freight On Board)
  The location where the retailer takes ownership of Licensed Products or Articles and from where shipping costs are calculated. For example, 'F.O.B. Hong Kong' means that a Licensee is selling Licensed Products to a retailer who takes possession in Hong Kong, and thus it is the responsibility of the retailer to manage the logistics and costs to bring the goods to the U.S. Retailers pay lower Wholesale Prices for goods that are F.O.B. outside the U.S., and consequently Royalties to the Licensor are lower. Licensors typically charge higher Royalty Rates for licensed products that are F.O.B. outside the U.S.
• Grant or Grant of Rights
  The authority granted by the owner of a Brand, Copyright or Mark, to use such in connection with the development manufacture and or distribution of Licensed Products or Articles. See Product Grant, Distribution Grant or Territory and Copyright Infringement Grant.
• Gross (Wholesale) Sales
  Sales figure computed by multiplying all units sold of Licensed Products or Articles by the Wholesale sales price. No deductions, such as Returns or freight, are subtracted from Gross Sales.
• Guarantee
  The minimum Royalty Payment, or prepaid royalties that a Licensee is contractually obligated to pay a Licensor. Typically, the Guarantee is computed by taking a percentage of the licensee's estimated Royalties for the entire Term of the License Agreement. Guarantees may be paid quarterly, semi-annually or annually and are typically nonrefundable and credited against future Earned Royalties. See also Minimum Royalty Guarantee, and Advances.
• Infringement
  See Trademark and Copyright Infringement.
• Infringer
  A company or individual that uses the Copyrights or Trademarks of another without authorization.
• Initial Term
  The first contracted period of time for which a Licensor grants the Licensee the use of its Licensed Property. See also Term.
• Insurance
  The amount and type (e.g., product liability) of insurance contractually required by the Licensor, that the licensee must obtain in order to sell the Licensed Products or Articles. Product Liability Insurance obligations typically state minimum amounts for the limit of liability and the deductible.
• Licensable Assets
  Logos, brand names, marks, photographs, designs and other imagery owned, or held, by the Licensor, that Licensees are authorized to use on, or within, Licensed Products or Articles. Licensable assets are given to licensees via a Style Guide.
• License
  A permission to use a Brand name, Mark or piece of intellectual property within a defined Term, Channels of Distribution or Territory.
• License Agreement
  The contract between the Licensor and Licensee that grants the right to use the Licensed Property in a specified manner in exchange for payment; typically a Royalty based on Wholesale Sales. The license agreement lays out the terms of the partnership including: legal, financial and other.
• Licensed Products or Articles
  The items (i.e., T-shirt, poster), or categories of items (i.e., toys, tabletop), bearing the Licensor's brand name, logo, Mark or Licensable Assets that the Licensee is permitted to develop, manufacture, market and sell.
• Licensed Property
  The Brand, Copyright or Mark owned, or held, by the Licensor, which is granted for use by the Licensee in the development, manufacture, marketing and sale of Licensed Products or Articles.
• Licensee
  The manufacturer to whom a License is granted by a Licensor for the right to use the Licensed Property in the development, manufacture, marketing and sale of Licensed Products or Articles.
• Licensing
  The business of granting companies the right to develop, manufacture, market and sell licensed products bearing brand names, marks, or licensable assets owned, or held, by another company for a defined term, through approved distribution channels in return for payment; typically a royalty based on wholesale sales.
• Licensing Agent
  A company that develops and manages licensing programs for brand owners or licensors, and manufacturers or licensees. The primary role of the agent is to bring the two parties together to consummate license agreements in return for a share of the royalties.
• Licensing Application
  A form required by a Licensor that is used to obtain pertinent information about a prospective Licensee for the assessment of that licensee in the Licensing Program. Licensing Applications typically include company, sales history, distribution, marketing and financial information in addition to the licensee's proposed plans for the Licensed Property.
• Licensing In
  See Brand Acquisition Licensing.
• Licensing Out
  See Brand Representation Licensing.
• Licensing Program
  The entirety of all licensing activities around a Licensed Property, or group of properties.
• Licensing Theme
  Separate and unique sub-programs found within larger Licensing Program, which are used to generate increased sales and interest. Licensing Themes typically require separate Guarantees and have their own Style Guides. Examples of Licensing Themes include: holiday, vintage or baby.
• Licensor
  The company or individual, who owns or holds the rights to, the Licensed Property, Copyright, brand name, or Mark, and who grants Licensees the rights to develop, manufacture, market and sell Licensed Products or Articles via a License Agreement.
• Manufacturer
  A company that develops, markets and sells Licensed Products or Articles. Also referred to as the Licensee.
• Mark
  See Trademark or Service Mark (SM).
• Marketing Requirements
  The Licensee's contractually obligated marketing activities that take many forms such as: advertising or trade-show presence.
• Marketing Royalty
  A percentage of the Licensee's Net (Wholesale) Sales that are used to market and promote the Licensed Products or Articles. Sometimes referred to by "8 plus 3" meaning that there is an 8% royalty and 3% marketing royalty.
• Mass or Mass Market
  Channels of Distribution comprised of a few large retailers who reach a large number of consumers such as: Wal*mart, Sears, K-Mart or Target.
• Minimum
  See Guarantee.
• Minimum Royalty Guarantee
  See Guarantee.
• Net (Wholesale) Sales
  Sales figure computed by taking Gross (Wholesale) Sales (total sales of Licensed Products or Articles multiplied by Wholesale Price) and subtracting allowed deductions such as Returns or freight.
• One-Sheet
  A single page used to market a Licensed Property that summarizes the licensed property and provides rationale as to why a Licensee might wish to acquire the License.
• Overage
  The total amount of Royalties paid to a Licensor above the Guarantee.
• Paid Royalties
  The Royalties that are sent to a Licensor by Licensee computed by subtracting paid Guarantees from Earned Royalties (or multiplying the Royalty Rate by the Net (Wholesale) Sales of all Licensed Products or Articles and subtracting the Guarantee). Earned Royalties + paid Guarantees and Advances = Paid Royalties.
• Points
  See Royalty Rate.
• Product Category
  A group of related products that, bundled together, can be classified as a separate entity or class, such as: apparel, personal accessories, toys or HBA (Health and Beauty Aides).
• Product Grant
  The contractually approved list of Licensed Products or Articles or Product Categories that are authorized to be manufactured and sold.
• Property
  See Licensed Property.
• Property Grant
  The contractually approved list of Brands, Copyrights or Marks that are authorized to be used in the development, manufacturing, market and sale of Licensed Products or Articles.
• Registered Trademark
  A protected Mark consisting of words and/or symbols that is registered with the government at the USPTO (US Patent and Trademark Office) in a particular Class of Goods or services.
• Registration Mark, ®
  The symbol used to denote that a Trademark is registered with the USPTO.
• Renewal
  The additional Term of a License Agreement, which begins immediately following the end of the previous license agreement. Renewals can be automatically triggered at the end of the Initial Term if established financial or sales targets are met, or as otherwise contemplated in the agreement.
• Retail Price
  The unit price, determined at the retailer's sole discretion, that a consumer pays to obtain the Licensed Products or Articles.
• Returns
  Licensed Products or Articles that are sent back to the Licensee from the retailer for any reason. Typically, there is a limit to the number of returns that a Licensor will allow to be subtracted from Gross (Wholesale) Sales to compute Net (Wholesale) Sales.
• Royalties
  Monies paid to a Licensor by a Licensee for the right to use the Licensed Property computed by multiplying the Royalty Rate by the Net (Wholesale) Sales.
• Royalty Payment
  See Royalties.
• Royalty Rate
  The percentage of sales, typically Net (Wholesale) Sales paid to the licensor by the Licensee for the right to use the Licensed Products or Articles.
• Royalty Report
  A statement provided to the Licensor by the Licensee on a routine basis (typically quarterly) that describes the previous period's Wholesale Sales, Earned Royalties, owed Royalties and details how these are computed.
• Sell-Off Period
  The time period after the License Agreement expires during which a Licensee is permitted to sell remaining stock of Licensed Products or Articles. Royalties generated from sales during the sell-off period cannot typically be credited against the required Guarantee.
• Service Mark (SM)
  A word, slogan, design, picture, or any other symbol used to identify and distinguish a service (such as hotel and restaurant services, sales services, investment services) as opposed to a product. A Service Mark is the similar to a Trademark except that it identifies and distinguishes the source and quality of a service rather than a product.
• Signing Bonus
  A payment to a Licensor by a Licensee to acquire the rights for Licensed Products or Articles. Signing bonuses are typically not credited against Guarantees and are on top of advance payments.
• SKU or Stock Keeping Unit
  A unique number assigned to each piece of Licensed Product or Article, used by Licensees and retailers. Sizes and colors of licensed products each have their own SKU.
• Strategic Licensing Plan (SLP)
  A document, developed by the Licensing Agent with input and approval by the Licensor that outlines strategies and details of the Licensing Program. A well-written plan includes the targeted list of Licensed Products or Articles, Channels of Distribution and marketing plans.
• Style Guide
  A manual (book, CD ROM or website) produced by Licensors, which provides information, creative direction and design assets to guide Licensees in the development of Licensed Products or Articles, packaging and Collateral Materials. Style guides typically include: corporate identity information, typography, color palettes, Licensable Assets, packaging guidelines, legal requirements and other pertinent information.
• Sub Agent
  A Licensing Agent hired by the primary licensing agent to handle a particular aspect of the Licensing Program such as a specific Territory or Product Category.
• Symbols
  © meaning Copyright, ® meaning Registered trademark, and ™ meaning Trademark.
• Term
  The contracted period of time that a Licensor grants the Licensee the use of its Licensed Products or Articles. See also Initial Term.
• Territory
  The geographic area, typically defined by country, in which the Licensor grants the Licensee the right to sell the Licensed Products or Articles.
• Trade Dress
  The total of all the elements in which a product or service is packaged, such as the distinctive shape, silhouette and appearance of a product or container, including such items as the cover of a book or magazine or the recognizable shape of an automobile. These elements combine to create the visual image, or look and feel, presented to customers and can sometimes be Trademarked.
• Trade Name
  A name of a business or company, which is not necessarily a Trademark.
• Trademark
  A word, name, slogan, logo, design, picture, or other symbol used to identify and distinguish goods. Broadly defined, a trademark is any identifying symbol, including a word, design, or shape of a product or container, that qualifies for legal status as a trademark, service mark, collective mark, certification mark, trade name, or trade dress. Trademarks identify one seller's goods and distinguish them from goods sold by others. The terms "trademark" and "mark" are commonly used to refer to both trademarks and service marks. Trademark rights may be used to prevent others from using a confusingly similar mark, but not to prevent others from making the same goods or from selling the same goods or services under a clearly different mark.
• Trademark and Copyright Infringement
  The illegal, unauthorized manufacturing of products that contain a Brand name, Mark or logo, which has a Trademark or Copyright, without the permission of the owner or holder. Or, the use of a mark by a company that causes confusion of source, affiliation, connection, or sponsorship of another mark.
• Trademark‚™
  The symbol used to denote that a particular company or individual is asserting trademark rights in a Mark, Brand or logo.
• USPTO (US Patent and Trademark Office)
  The governmental agency that manages the registration of, and provides protection to, the owners of patents and Trademark.
• Wholesale Price
  The unit price, determined at the Licensee's sole discretion, that a retailer pays to obtain the Licensed Products or Articles. Royalties are often computed using the wholesale price
• Wholesale Sales
  Sales figure computed by taking Gross (Wholesale) Sales (total unit sales of Licensed Products or Articles multiplied by Wholesale Selling Price). Wholesale Sales can be either Net (Wholesale) Sales or Gross (Wholesale) Sales.