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The granting of permission to use intellectual property rights, such as trademarks, patents, or technology, under defined conditions. Under this method, the manufacturer enters into an agreement with a licensee in the foreign country and this gives him the right to use the manufacturing process, a patent design or a trademark, technical information or some facility in return for some fee or royalty.
Licensor
The licensor approves the product and collects the licensing fees and royalties Ex: WB will give permission to Electronic Arts to use the Harry Potter character
Licensor (cont)
Companies typically pay between 5 and 10 percent of wholesales in the form of royalties
$900,000 in sales -10% royalties ($90,000) $810,000 before you pay the bills
Advantages of Licensing
Advantages for Licensor
1.Enhanced company image and publicity 2.Increased profit from royalties 3.Increased brand awareness or recognition 4.Increased opportunity for penetrating new markets 5.Limited manufacturing costs or risks
Disadvantages of Licensing
Disadvantage for licensor
1. Potential for poor quality of a licensees manufactured products 2. Partial relinquishment of control over the marketing mix of the brand
Why license?
The Licensors reasons might include:
to make money to help sell products, services, equipment to obtain technology via grantback to secure a market to settle a patent dispute cross-licensing of other, existing technology rights to future technology to buy continued development of the licensors technology
Bootlegging
Bootlegging is unauthorized use of a name, logo, or trademark of a league, athlete, sports team, entertainer, film, TV show or character Bootlegging reduces the profits of the licensors and legitimate licensees
Bootlegging (cont)
Bootlegging can result in poor quality products for consumers, which will decrease brand loyalty
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