Outright Sale & Licensing

My pattern for licensing

My pattern for licensing

It has been a while since my last blog post.  I cannot believe we are already half way through 2019.  To start a blog in 2019, lets talk about the difference of selling outright and licensing a pattern or a design.  It is my pleasure to have Tamara Liebman from Calibrate Legal to talk about these.  Tamara is a commercial lawyer based in Auckland and I always go to Tamara for any questions regarding licensing agreements and contracts.  Lets hear what Tamara says about them:

If you’re a designer there is more than one way to make an income from your original work.  The simplest option is to sell a design outright, either in response to a commission from a client, or by finding a buyer for a completed design.  This is great, making money from your designs, but it means you only make that money once.

The other option is to licence a design.  If you look around you’ll see stores full of products displaying licenced designs.  These products are the result of a collaboration between the manufacturer and the designer.  I’d say the most well-known examples of licensed products are those showing Disney®characters.

When you licence a design you don’t sell it outright.  Instead, you retain ownership while giving your customer the right to use it and profit from it.  In return, your customer pays you a fee.  The fee can be formulated in a number of ways using a combination of royalties and one-off payments.  

Royalties are usually calculated on the basis of units sold.  As you can imagine, the fee per unit is most likely going to be small, so it’s going to take the sale of a lot of units to give you a decent income from licensing one design.

The beauty of licensing designs is that the designer doesn’t need to invest in or pay for the manufacturing capability.  Each partner in the collaborative relationship can focus on their area of expertise.  For the designer it also means that they may be able to collaborate with a number of difference manufacturers, although it’s wise to be strategic about this.

The benefit for the manufacturer is that they need not have all their design expertise inhouse, which would be super costly.  The manufacturer can also trade off the designer’s brand reputation.  It’s a win-win!

The licencing arrangement absolutely must be documented in a properly drafted legal agreement.  That way both parties know where they stand and what their rights and obligations are.  If anything ever goes wrong the agreement will be there to help with a resolution.

If you would like to license my patterns, please feel free to get in touch with me.

If you’d like to know more about the legal aspects of design and licencing feel free to get in touch with Tamara from Calibrate Legal on tamara@calibratelegal.nz


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