Licensing in fashion industry
What is the meaning of licensing agreement? The verb to license is synonymous of give permission. A licensing agreement is an authorization to use licensed material granted by a party named: Licensor to another party called: Licensee. This is a contract between this two parties. The purpose of a licensing agreement is the authorized use of the licensee’s trademark, by the licensee, specified in the terms of the contract.
We know two different types of licensing based in the use of common trademarks or famous trademarks. The Licensing in fashion industries is based in the use of famous brands such us Airman, Dolce & Cabana, Pravda and other mansion. A license under intellectual property has several components such us: ?+ Term ?+ Auditing: quality control monitoring ?+ Advertising and other costs connected to promotion ?+ Exclusivity ?+ Termination: Renewal ?+ Infringement: Litigation The assignment of a license often depends on specific contractual terms.
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The licensing agreement is only applicable for a particular geographic region, Just for a certain period of time or barely for a stage in the value chain. L 1. Advantages of a licensing agreement. When a society decides to put in place a licensing agreement must assess what are the benefits that will arise from the relationship between Licensor and Licensee. ?+ Advantages for Licensor: as in all the contract is important to have a return.
A licensing agreement is useful to enlarge the society’s geographic market; to decentralized and differentiate the offer in order to reduce the business risks; to increase the recognition, popularity and fame of her core brands, giving the same image of trademark in each store and in all points of sales; financial benefits in remarry market due to positive feedback in licensee’s products and in secondary market because of royalties in licensee’s sales. ?+ Advantages for Licensee: industrial benefits in order to increase the range of licensee’s products by making them more recognizable by supporting low costs to rise trademark distinctiveness. . 3 terms of the contract. A successful brand licensing requires a planned strategy: ?+ to determine core brand’s values in order to use them in the new category of products. ?+ to identify the level of differentiation desired. ?+ the achievement of leverage in the new category of products/services. . 4 several risks for the parties. One of the risks for licensor is due to the lack of monetary return: Royalties. But the major risk is the loss of control regarding the uniqueness of the brand (the customer feel inaccessible the trademark’s products). The licensee’s product are always not in line with the concept of trademark, so its value is blurred. The market confusion regarding the change of the trademark’s strategic position that cause the disorientation of loyal costumer. The risk of lower quality of licensee’s products than the quality of licensee’s services, that bring consumers to Judge products not good enough to be acquired. The high cost of license agreement. The impossibility to have enough time and business to recoup the investments. The risk of management of unsold goods and inventories.
The licensor and the licensee must discuss about the licensing agreement in order to decrease the risks. There are many clauses which the parties can establish to better define the terms of the contract in order to ameliorate the performance. The subject of the major clauses regards the fees beyond royalties, sub-licenses and the costs connected with promotion and advertising of trademark’s products. The base of a good licensing agreement is the correct and clear information about the firm: its value, positioning and the quality of its image. 1. Rules about Licensing agreement in USA. The Layman act 1125: the mistake caused by any people who in commerce uses any word, name, symbol or the combination of both similar to another recognizable trademark could be liable in a civil action. According to the Layman act 1064 a petition to cancel a registration of trademark may be changed at any time if the trademark is used by the registrant or with his permission so as to misrepresent the resource of goods or services in connection with which the mark is used. 3 1. 6 Licensing agreement in European law.
Art 51 the rights of the owner of a community trademark must be revoked, the licensee is liable to misrepresent the public. Both in USA and in EX. the licensee run two typologies of risks: ?+ common repairs ?+ cancellation As we said in the first part of the essay the licensor has an economic advantage to defend the power and recognition of the trademark but he has also a Juridical interest not to lose the registration of trademark. 4 1. 7 How to defend the trademark. The licensor has two possibilities to preserve his trademark. Ђ?+ Ex ante he can includes in the licensing agreement clauses about monitoring and inspecting the quality and the standards of the services provided. Licensee’s purpose and licensee’s interest must be aliened. ?+ Ex post the licensor could act against the licensee if he did not respect the contract (like the quality of the service) or if he forged the trademark. 2. 1 The brand Licensing. Introduction. The license agreement relates to a right granted by a permit, if there is not this authorization the use of the mark is an illegal act.
The license agreement must not be confused with a permit that relates to a license for a shorter period of time. The brand licensing deals with the granting of licenses by those who own the trademark to those who are interested (individuals or companies) to use them in the production of the products, over a period of time and in a defined territory. The brand licensing, especially in the fashion industry, is used to extend own brands to products of an entirely different nature.
The licensor has the advantages such as: being able to choose the products to be sold under license and authorize the sale of prototypes ND choose the best licensee. The benefits in a license agreement also concern the licensee, he may increase his market power by strengthening the brand through brand recognition, increase its sales going to extend the range of audiences served, develop models and sell them in special shops. Enter into a contract brings benefits to both of the parties: the licensee must paid periodically (monthly, semi-annually depending on terms of the contract signed by both parties) royalties to the licensor.
And the licensee has a return on sales and investments with the exploitation of licensor’ s trademark. Most of the major Italian fashion industries enters into licensing agreements for ancillary products, such as perfumes, sunglasses, watches (an example is that of D or Airman) or for the production of knitwear, such as Ralph Lauren. The fashion licensing is the most widespread among the license agreements between industries. As we said before it mostly concerns the dissemination of products relating to health and beauty, accessories, clothing and household products. N some cases the brand owner decides to license the production, distribution and marketing of its core apparel categories, in other cases, he designer of the brand identifies specific categories that can be licensed by extending the brand into areas other than those of clothing. The licensor maintains strict control over the quality and the design. 2. 2 Airman case a practical example. We can see a practical example with the license agreement signed in 2011 between Airman and Ululation for the production and distribution of prescription frames and sunglasses.
The Airman Group has decided not to renew the licensing agreement with Safari, expiring on December 31, 2012, in favor of Ululation. The licensing agreement with Ululation, anticipated with the signing of a letter of intent basis, in November 2011, for a ten-year exclusive license agreement for the design, production and distribution worldwide for collections of sunglasses and prescription eye-wear under the Giorgio Airman, Emporium Airman and a / X from 2013.
After ten years of intense collaboration with Safari the Airman group decides not to renew the contract, a serious loss in the short period (150-200 million euros) for Safely that is certain to recover it in the long term thanks to licensing agreements with Polo Ralph Lauren ND Cline. Andrea Gouger, CEO of Ululation says: “Back in 1988 Giorgio Airman and Ululation started a very successful Journey together: together we changed the world of eyeglasses which, previously perceived as mere functional instruments, evolved into ‘aware’ and into indispensable fashion accessories.
Airman is eponymous of excellence of ‘Made in Italy and represents values which are perfectly in line with ours. We are therefore excited to work together again, in a partnership that will for sure be mutually beneficial,” The market had already understood the impending ivories between Airman and Safely, favoring an agreement with Ululation who previously collaborated with the Group from 1988 to 2003, a long collaboration that led to explode the sunglasses and eyeglasses sector, making the glasses a real fashion accessory.
The non-renewal of the license agreement between Airman and Ululation in 2003 was a surprise analyzing the close cooperation and sharing of innovative ideas between the two entrepreneurs. 2. 3 Michael Koru case a practical example. With this example we may analyze the key parts of the license agreement, between Michael Koru and P. R. China, which can often be considered common to all licensing agreements in the world of fashion industry regarding the manufacturing of the products.