A well-constructed licensing or distribution agreement protects intellectual property, clarifies revenue sharing, and sets expectations for marketing and quality control. It helps prevent costly litigation, supports scalable expansion into new territories, and preserves relationships by defining dispute resolution and performance metrics. Strong contracts also enhance the value of a business during sales or investor due diligence.
Comprehensive agreements allocate risks and responsibilities, making outcomes more predictable for planning and investment. By defining warranties, liability caps, indemnities, and insurance expectations, parties reduce uncertainty and better manage exposure to regulatory or market changes that could impact operations.
Hatcher Legal brings a commercial approach to contract drafting that balances legal protection with operational needs. The firm guides clients through negotiation, helps structure payment and reporting systems, and ensures agreements align with broader corporate and succession planning objectives.
We advise on appropriate remedies such as specific performance, damages, or injunctive relief and help implement dispute resolution plans that favor efficient resolution. Well-drafted dispute clauses preserve commercial relationships while protecting our client’s rights.
A licensing agreement grants permission to use intellectual property such as trademarks, patents, or copyrighted material under defined conditions, often including royalties and usage limits. It focuses on rights to exploit intangible assets while maintaining control over how those assets are used, modified, or sublicensed. A distribution agreement governs how products or services are sold and delivered through third-party channels, addressing supply, pricing, territorial rights, delivery terms, and responsibilities for marketing and after-sale support. Both contracts can overlap when licensed products are distributed by third parties, so alignment of terms is important.
Royalties can be structured as fixed fees, percentage of net sales, minimum guarantees, or hybrid models. Choose formulas that reflect profit margins, sales cycles, and the value of the licensed asset, and include clear definitions of gross and net sales and allowable deductions. Minimum guarantees ensure a baseline payment to the licensor and can protect against underperformance, but they should be realistic and tied to performance reviews. Include reporting intervals, payment schedules, and audit rights to verify calculations and address discrepancies efficiently.
Yes, parties can grant exclusive distribution rights within defined territories or channels, which can incentivize investment by the distributor in marketing and support. Exclusivity should be narrowly tailored by territory, product line, and duration to prevent unintended restrictions and to allow future expansion. Include performance milestones, sales targets, and renewal criteria to prevent exclusivity from creating complacency. Carve-outs for online sales or other channels can preserve flexibility, and termination clauses should address failure to meet agreed performance standards.
Quality control measures can include specifications for materials, manufacturing standards, inspection procedures, and approval rights for marketing and packaging. These clauses protect brand reputation and ensure that products comply with safety or regulatory standards. Also include remedies for breaches such as correction obligations, product recalls, or termination rights. Periodic audits and approval processes for new suppliers or subcontractors help maintain consistent quality across distribution networks.
International licensing requires attention to local IP registration, enforcement mechanisms, and differences in contract interpretation across jurisdictions. Register key trademarks and patents where possible, and include clear choice-of-law and forum selection clauses to guide dispute resolution. Address export controls, customs, localization requirements, and tax implications. Consider requiring counterparties to maintain local insurance and include compliance representations, and implement practical enforcement strategies for cross-border breaches or counterfeiting.
Common termination triggers include uncured material breach, insolvency or bankruptcy of a party, failure to meet minimum performance obligations, and illegal or unethical conduct affecting the relationship. Notice and cure periods give the other party time to remedy issues before termination. Also include termination for convenience if desired, with defined wind-down procedures for inventory, outstanding payments, and transition assistance. Post-termination obligations such as residual royalties, nonsolicitation, and return of confidential information should be specified to avoid future disputes.
Ensure accurate royalty reporting by defining clearly what constitutes royalties, the accounting methodology, acceptable deductions, and the reporting schedule. Include audit rights that allow the licensor to verify sales through periodic inspections conducted by an independent accountant. Set terms for resolving discrepancies, including interest on underpayments and limits on the audit period. Confidentiality protections for shared financial data and procedures for handling disputed items improve trust and reduce conflict during reconciliations.
Non-compete or non-solicitation clauses can protect market position and customer relationships, but they must be carefully limited by geography, duration, and scope to be enforceable and commercially reasonable. Overly broad restrictions can be challenged and undermine business flexibility. Consider alternatives such as non-solicitation, confidentiality, and non-use clauses which often provide meaningful protection without the enforcement risks associated with broad non-competes. Tailor restrictions to reflect legitimate business interests and local enforceability standards.
Distribution agreements must comply with consumer protection laws governing warranties, returns, labeling, pricing, and product safety. Ensure contractual warranties align with applicable statutory obligations and clearly allocate who handles recalls, customer complaints, and warranty claims. Include requirements for compliance with advertising laws and truthful marketing, and specify procedures for handling consumer disputes. Allocating responsibility for regulatory compliance reduces risk and helps maintain good standing with consumers and regulators.
Renegotiate or amend agreements when market conditions, technology, or business strategy change significantly, such as shifts in demand, new regulatory requirements, or major product updates. Proactive amendments help avoid disputes that arise from outdated terms or unexpected business realities. Use negotiated amendments to realign incentives, update payment structures, and refresh compliance obligations. Include clear amendment procedures in the original agreement to streamline future changes and avoid uncertainty about the parties’ ability to adapt.
