Licensing Agreement

A Licensing Agreement is the legal instrument by which the owner of an intangible asset (trademark, copyright, patent, technology, software, content, brand, know-how, designs) grants another party the right to use that asset, on defined terms, for defined territories, and for defined consideration. By 2026, India's licensing economy is large — Bollywood / OTT content licensing, software / SaaS sub-licensing, foreign brand licensing into India (apparel, F&B, tech), Indian brand licensing globally, and technology / patent licensing for industrial use. Done properly, a licensing agreement is a high-margin recurring-revenue instrument; done badly, it leaks IP value, creates unintended exclusivity, fails on royalty audits, and exposes the licensor to taxation in unexpected jurisdictions.

The legal architecture: Copyright Act 1957 (for content / software / artistic works), Trade Marks Act 1999 (for brand / TM licensing — registered users / Section 48 of the Act), Patents Act 1970 (for patent licensing — Section 84 compulsory licensing exceptions), Indian Contract Act 1872, Specific Relief (Amendment) Act 2018, FEMA (royalty repatriation for cross-border), GST (place of supply for IP services — typically supplier's location for B2B intra-State, recipient's State for inter-State), Income-tax Act (royalty under Section 9(1)(vi) for non-resident; TDS under Section 195 / 194-J).

We draft licensing agreements end-to-end — IP licensing, brand licensing, technology licensing, software / SaaS licensing, content licensing — for licensors and licensees in India and globally.

What's Inside a Watertight Licensing Agreement

• Grant of Licence:: Exclusive vs non-exclusive vs sole licence; perpetual vs term-based; sub-licensable vs not; territories (India, sub-continent, global); fields of use (e.g., apparel only, B2B only).

• Royalty & Consideration:: Upfront fee + running royalty (% of net sales / net revenue); minimum guarantee (per year / cumulative); royalty cap; royalty on sub-licensee revenue; royalty audit rights.

• Quality Control / Brand Protection:: For brand licensing — quality standards, sample approvals, manufacturing audit, brand guidelines, packaging approvals.

• Indemnity:: Licensor's IP-infringement indemnity (warranting it owns / can grant); licensee's indemnity for misuse / quality issues; aggregate cap.

• Cross-Border Royalty & Tax:: For Indian licensee paying foreign licensor — withholding under Section 195 IT Act (typically 10%-20% per DTAA), Form 10F + TRC, 15CA/15CB; FEMA Form A2; equalisation levy interplay where applicable.

• FEMA Compliance:: Royalty payment routes (automatic / approval) under Master Direction; sectoral caps (varies for trademark vs technology vs other); FERA-era restrictions removed in most cases.

• Term, Termination & Post-Termination:: Term (typically 5-10 years, renewable); termination triggers (breach, insolvency, change of control); post-termination — sell-off period for inventory, IP take-back, royalty true-up.

• Dispute Resolution:: For domestic — Indian arbitration; for cross-border — Singapore / London / New York seat with SIAC / LCIA / ICC; governing law typically licensor's home country.

Common Failure Modes

Exclusivity granted too broadly — licensor cannot license to anyone else even where licensee is failing. Royalty base ambiguous (gross vs net, with / without taxes / discounts). Quality control absent for brand licensing — brand reputation damaged by licensee. Royalty audit rights missing — licensor cannot verify reported royalties. Withholding tax / FEMA route not addressed — payments stuck or grossed-up unexpectedly. We pre-empt all of these in drafting.