The license agreement allows one party (licensee) to use and/or earn income from the property of the owner (licensor).
License agreements generate income, called royalties, earned by a company for allowing its copyrighted or proprietary material to be used by another company.
Some examples of things that may be licensed include songs, sports team logos, intellectual property, software and technology.
Licensing agreements allow parties to control ownership and enter new markets without having to spend money on it.
The disadvantages of such transactions include establishing relationships with the wrong company and the possibility of losing the company’s reputation.