Robust licensing and distribution contracts help preserve revenue streams, reduce exposure to infringement claims, and provide enforceable remedies for breaches. They enable businesses to expand into new territories while protecting intellectual property, set clear performance expectations for partners, and establish dispute resolution mechanisms that limit disruption and protect commercial relationships across supply chains.
Comprehensive agreements create predictable cash flows by defining compensation, payment schedules, and audit rights. Performance and minimum purchase clauses reduce volatility, and clear remedies for breaches limit uncertainty. This predictability helps companies plan investments, manage supply chain commitments, and make informed strategic decisions based on reliable contractual frameworks.
Hatcher Legal offers focused business law services that integrate transactional drafting with strategic negotiation support. We work to align contract terms with your commercial goals, mitigate regulatory risk, and build protections around intellectual property and revenue streams so agreements support growth while limiting exposure to disputes and financial loss.
As relationships evolve, we draft amendments to accommodate growth, adjust territories, or update pricing structures. If disputes arise, we pursue resolution through negotiation, mediation, or litigation support as appropriate, always considering the business impact and seeking efficient, practical outcomes that preserve commercial relationships.
A license grants permission to use intellectual property under defined conditions, such as trademarks, patents, or software rights, while a distribution agreement governs the sale and resale of physical products, addressing logistics, pricing, and inventory responsibilities. Licenses focus on scope of use; distribution agreements focus on channels and commercial performance. Both contract types can overlap when a distributor is also granted limited IP rights for marketing or resale. Careful drafting distinguishes ownership from usage rights, sets quality controls, and defines compensation models so parties understand whether they are buying rights to sell products or permission to use protected assets.
Royalty and pricing structures should reflect your product lifecycle, market norms, and bargaining position. Options include percentage of net sales, fixed per-unit fees, minimum guaranteed payments, or hybrid models. Ensure definitions of net sales are clear and account for discounts, returns, and taxes to prevent disputes over calculation methods. Include payment schedules, currency terms, audit rights, and remedies for late or missing payments. Minimum guarantees or step-up royalties tied to performance encourage partner investment, while audits and reporting obligations provide transparency to verify accurate compensation over time.
Territory clauses define geographic scope, channels of sale, and whether rights are exclusive. Include precise boundaries, carve-outs for online sales, and conditions for territorial expansion or contraction. Clarity prevents overlap and channel conflict, and helps manage pricing and marketing strategies across regions. Consider performance thresholds that maintain exclusivity, such as minimum sales volumes or marketing commitments. Also address language for jurisdictional compliance and distribution logistics, ensuring the territory aligns with customs, import regulations, and market-specific requirements that could affect performance.
Protect your brand with quality control provisions, approval rights for packaging and marketing materials, and clear use restrictions for trademarks. Require adherence to branding guidelines and periodic inspections or sample approvals to ensure consistency and protect customer perception across markets. Include remedies for breaches of quality standards, such as cure periods and termination rights, and require corrective action plans for any nonconforming products. Confidentiality obligations and controls on sublicensing help prevent dilution or misuse of brand assets by downstream partners.
Common termination provisions include material breach, insolvency, failure to meet minimum performance requirements, and mutual termination with notice. Define notice periods, cure opportunities, and what constitutes a material breach to provide predictability and avoid premature contract disruption. Also include transition clauses addressing remaining inventory, customer data, and post-termination rights to sell off stock. Clear provisions for intellectual property use after termination, and obligations to return confidential information, help minimize disputes and support an orderly wind-down where necessary.
Audit rights and reporting requirements are appropriate when royalties, revenue sharing, or compliance with performance targets are involved. Specify frequency of reports, acceptable accounting practices, and the scope and timing of audits. These measures ensure transparency and protect revenue streams from underreporting or miscalculation. Balance audit provisions with reasonableness, limiting disruption by defining acceptable auditors, confidentiality obligations, and costs. Include remedies for discrepancies discovered during audits, such as interest, penalties, and corrective accounting procedures to resolve disputes effectively.
Dispute resolution provisions commonly call for negotiation and mediation before pursuing litigation, and may provide for arbitration as a private, binding alternative. Specify governing law and jurisdiction to reduce uncertainty and align with business expectations, which helps manage enforcement risks in cross-border situations. Select dispute mechanisms that balance efficiency and enforceability, considering cost, confidentiality, and appeal rights. Well-crafted contractual dispute processes often preserve commercial relationships by promoting resolution through structured dialogue and neutral third-party facilitation before escalating to court actions.
Before licensing technology, conduct due diligence on the potential licensee’s financial stability, technical capacity, and market access. Identify any legal or regulatory hurdles, document ownership and chain of title for the technology, and determine whether improvements will be jointly owned or assigned. This preparation protects the licensor’s interests. Draft clear terms addressing scope of use, sublicensing permissions, maintenance, support, and liability limitations. Define obligations for updates, bug fixes, and security, and include confidentiality and data protection measures to prevent unintended disclosure of proprietary information.
Exclusivity can protect market share and motivate a partner to invest in distribution, but it may constrain your ability to appoint additional channels or enter new markets. Carefully limit exclusivity by geography, product line, or timeframe, and include performance milestones to retain flexibility if the partner underperforms. Consider nonexclusive arrangements or conditional exclusivity tied to minimum sales to preserve options for growth. Clear termination clauses and carve-outs for direct online sales help maintain the company’s ability to respond to changing market conditions without being locked into a restrictive arrangement.
Distribution agreements can and should address both online and brick-and-mortar sales by defining permitted channels, pricing policies, and territorial rules for each channel. Clarify how online sales are treated for territorial exclusivity, pricing parity, and returns to prevent conflicts between channels and manage customer expectations across platforms. Include provisions for marketplace sellers, cross-border shipping, and digital distribution to adapt to multi-channel commerce. Clear rules on permitted platforms, advertising standards, and handling of customer service and warranties help coordinate sales strategies and protect brand consistency.
