Strong brands can provide a valuable competitive advantage for companies. In fact, many successful new products are line or brand extensions.

Trademark licensing offers a viable option for brand owners to enter new markets. Working with the right partners can improve success.

Licensing Fundamentals

‘Licensing’ refers to the use of trademark or copyright by a third-party licensee to enhance the appeal of a product or service. Licensing is used by companies across a wide range of markets and product categories.

Licensors ‘license-out’ their trademarks to obtain marketing benefits and high margin royalty revenue. Licensees ‘license-in’ trademarks to achieve high consumer awareness and appeal that results in incremental product sales.

The ‘licensing industry’ is often defined by the type of intellectual property (I.P.), and the product category that is licensed.  Licensed I.P. can be a brand, corporate name, character, entertainment, celebrity, designer, sports, art, music, or nonprofit.

Product categories include accessories, apparel, accessories, electronics, food/beverage, home furnishings, gift/novelties, housewares, music/video, publishing, sporting goods, stationery, toys, video games/software.

There are two common forms of trademark licensing: conventional and brand extension. The difference is important because the approach and requirements can vary dramatically.

Conventional Licensing includes characters, designs or trademarks that are used to convey an affiliation and/or for aesthetics purposes. Typically, licensed products fall into lower price, less important product categories. Most characters, movies and sports teams utilize conventional licensing.

Brand Extension Licensing involves brands with a clear image that provides a strong ‘fit’ with certain product categories (e.g. Maytag water heaters). A strong brand fit creates a transparent relationship between the licensor and manufacturer. Many corporations selling food, beverages or durable goods utilize this type of licensing.