Effective agreements minimize disputes by setting expectations for performance, termination, and compensation, and by providing dispute resolution pathways such as negotiation, mediation, or arbitration. They also protect confidential information and manage liability through indemnities and warranties, giving owners and distributors a predictable framework to grow sales and protect reputation.
Clauses such as liquidated damages, injunctive relief, and expedited dispute resolution provide practical leverage for addressing breaches quickly. Including precise notice requirements, cure periods, and escalation paths encourages resolution at an earlier stage and preserves business continuity.
We assist clients from startups to established companies with drafting and negotiating agreements including royalties, exclusivity, and performance metrics, and with preparing enforcement strategies to address breaches. Our approach emphasizes clarity, balanced allocation of risk, and commercial feasibility so agreements support growth.
When disputes arise we seek early resolution through negotiation or mediation when feasible, and advise on escalation to arbitration or litigation where necessary. We also assist with amending contracts to address changing market or regulatory conditions to avoid future conflicts.
A licensing agreement grants permission to use intellectual property under specified terms while a distribution agreement authorizes an entity to sell and distribute a product. The choice depends on control preferences, desired revenue model, and whether the owner wants to retain manufacturing or delegate sales activities to a distributor. Licensing is common for IP driven products; distribution suits physical product sales requiring logistics. Careful drafting clarifies responsibilities for marketing, pricing, and customer support, and determines whether sublicensing or resale is permitted. Counsel can evaluate commercial goals and recommend a structure that balances control with growth potential while aligning contractual terms with applicable state and federal regulations.
Royalties and payment terms should be transparent, with clear definitions of net sales, allowable deductions, reporting deadlines, and currency. Consider minimum guarantees or advance payments to secure baseline revenue, combined with percentage royalties on net sales, and include late payment interest to encourage timely remittance. Include audit rights and dispute resolution mechanisms to verify accuracy and resolve disagreements. Hybrid models that mix fixed fees with running royalties can align incentives and share risk, while clearly defined accounting rules reduce disputes about calculation and timing of payments.
Quality control provisions should set objective standards, approval processes for materials, and reasonable inspection frequency. Include corrective action steps and timelines for remedying nonconforming products, but avoid overly burdensome requirements that hinder distribution. Balance is important to maintain brand integrity while enabling practical operations. Allow licensors access to inspection and testing with appropriate notice and confidentiality protections. Define consequences for failing quality standards, such as suspension of distribution rights or required recalls, and specify who bears the cost of remediation to avoid disputes over responsibility.
Limitation of liability and indemnity clauses allocate risk by capping recoverable damages and specifying which party covers losses from third party claims, defective products, or breaches. Warranties should be narrowly tailored and time limited to reduce open ended liability, while indemnities address defense and settlement obligations for covered claims. Insurance requirements and mutual indemnities can further distribute risk reasonably. Drafting clear carve outs for gross negligence or willful misconduct and defining procedures for tendering defense and seeking indemnity reduce ambiguity and streamline resolution of potential claims.
Termination provisions should address notice periods, cure opportunities, and termination for convenience or material breach, as well as post termination obligations for inventory, outstanding payments, and handling of intellectual property. Clear timelines and procedures for winding down protect customers and transition operations smoothly. Include terms governing post termination use of trademarks, return or destruction of confidential information, and rights to existing customer lists if applicable. Provisions for transition assistance and inventory buybacks help minimize disruption and limit disputes over customer relationships after termination.
Audit rights are important to verify royalty payments, typically allowing periodic reviews of accounting records by an independent auditor with protections for data confidentiality. Clauses should specify frequency, scope, notice, and cost allocation if material discrepancies are found to ensure audits are practical and enforceable. Audits deter underreporting and create a mechanism to correct accounting errors. Well drafted audit provisions include confidentiality obligations, limitations on scope to relevant periods, and procedures for resolving disputes over findings to balance transparency with operational burden on the audited party.
Exclusivity grants sole rights in a territory or field and should be tied to measurable performance requirements such as sales targets or marketing commitments to prevent market stagnation. Time limited exclusivity with renewal tied to performance can motivate distributors while preserving the licensor’s ability to re evaluate the market. Include clear conditions for terminating exclusivity for non performance, and define whether sublicensing is permitted. Performance metrics and reporting obligations ensure exclusivity benefits both parties by aligning market development incentives with ongoing evaluation.
Remedies for breach can include cure periods, specific performance, injunctive relief, damages, and termination rights. Agreements often include stepped dispute resolution starting with negotiation or mediation before escalation to arbitration or litigation, which can preserve commercial relationships while providing avenues for meaningful relief. Include contractually defined remedies for IP infringement such as cease and desist, expedited injunctive relief, and indemnity obligations to cover losses. Clear notice and cure procedures reduce surprises and encourage early remediation, while defined escalation processes speed resolution when cooperation fails.
Cross border arrangements should address export controls, customs, taxes, currency, and compliance with foreign laws. Include clauses allocating responsibilities for regulatory approvals, product labeling, and import duties, and consider limitations on sublicensing or re export to controlled countries to ensure lawful distribution. Establish governing law and dispute resolution mechanisms appropriate for international issues, and include representations and warranties about compliance with applicable export and trade regulations. Counsel can identify regulatory risks and draft contractual protections to mitigate potential liabilities across jurisdictions.
Dispute resolution clauses should reflect the parties’ priorities: mediation can preserve relationships through facilitated negotiation, while arbitration provides a private binding forum that can be faster than court litigation. Choosing governing law involves assessing which jurisdiction’s commercial and IP rules best support the contract and enforcement needs. For regional agreements, selecting a governing law familiar to both parties and a neutral dispute resolution forum reduces uncertainty. Consider enforceability of awards across borders and include clear venue and jurisdictional clauses to avoid jurisdictional disputes during enforcement.
