Trademark licensing is the process by which a registered trademark owner, called a licensor or proprietor, allows another party, called a licensee, to make and distribute specific products or services under the licensor's trademark agreement. Trademark licensing is a type of merchandise agreement.
The licensor receives a certain amount of money or royalties, a percentage of all sales, in exchange for sharing the trademark. This compensation is also called consideration. Fashion and consumer products concerned with sports and entertainment are often sold under a trademark licensing agreement.
The licensee usually creates a trademark licensing agreement, but a licensor can also create this document. Both parties usually agree upon the terms before creating a trademark licensing agreement. To be eligible for legal enforcement, a trademark license agreement doesn't need to appear in writing. However, legal cases about written trademark license agreements are easier to resolve, less time consuming, and costly. Legal experts strongly recommend that all trademark licensing agreements get documented in writing and become signed and dated by both the licensor and licensee.