A licence agreement (sometimes referred to as a licensing agreement) is a contract whereby the owner of an asset grants another party permission to use that asset, usually in return for a fee.

Application for business people

The biggest relevance of licence agreements to business people is generally in terms of intellectual property or technology. Larger companies invest a lot of capital and resources into researching and developing a product for a specific purpose. Businesses then pay the developer for the right to use the product. The terms of this use and remuneration are set out in a licence agreement. A very common example is a licence agreement for a particular software program.

Alternatively, a business may be the owner of intellectual property. They may have designed a product, registered a trademark or patent or own a copyright. If that business wants to grant another party the right to use this asset, then a licence agreement will set out the conditions to govern such use. This can be a very important mechanism for businesses wishing to protect their brand, while also ensuring that they making a profit from third parties using whatever they have designed.

6 key things to consider

Granting another party the right to use an asset can be a big decision for a company. Some of the key factors you should consider before doing so include:

  1. Exactly what assets or products the licence agreement covers.
  2. The scope of the licence, that is, what the licensee is able to do with the asset that is the subject of the agreement.
  3. Whether there is any geographical limit to the licence agreement.
  4. Whether you, as the licensor, wish to provide any training or other technical assistance to the licensee for the purpose of using the asset.
  5. What payment the licensor will receive under the agreement – whether it should be an upfront fee or royalties or both.
  6. Whether a confidentiality agreement is also required to govern any sensitive information that may be shared as a result of the licence agreement.

Joe Kafrouni, Legal Practitioner Director, Kafrouni Lawyers


The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Small business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

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