Manufacturing and distribution license agreement is an agreement between the inventor and the company who will be manufacturing and distributing the product. 4 min read updated on September 19, 2022
A manufacturing and distribution license agreement is an agreement or contract between the individual or entity who invented a product and the company who will be manufacturing or building and distributing that item. This is a necessary agreement to enter into when an inventor chooses to not build their product, themselves.
As there are not any state or federal guidelines or regulations regarding these agreements, the involved parties are free to negotiate the terms of the contract however they choose. This may mean that the manufacturer receives a flat rate for their services, or it may mean that they are paid royalties or a percentage of the profits.
Ensuring that a solid manufacturing licensing agreement (MLA) is in place is vital to protect the rights and intellectual property of the inventor, while also protecting the financial compensation and rights of the manufacturer. Perhaps your business started out on Etsy, creating homemade jewelry or home décor. For a while, you were able to create the items yourself out of your home. But, due to the wonders of word of mouth and social media, your business has grown beyond the point that you are able to handle all of the incoming orders, on your own. So, it’s time to outsource to a small manufacturing company.
While a growing company is a good problem to have, as the creator of your brand, you want to protect it. You want to protect your intellectual property, trademarks, and marketing strategies. By having an MLA in place, you will be able to have peace of mind as you grow your company. If you are the owner, or head, of a manufacturing company, you want to protect your resources and ensure that you will be paid fairly and timely for your work.
An MLA will spell out the payment expectations and protect you against any lack of sales on the part of the licensor. (For example, if you are being paid on a royalty structure, an MLA will provide assurances that those royalties are met. If, for some reason, they are not, then the licensor will be responsible for completing payment.)
Additionally, an MLA can protect your manufacturing company from competing with other manufacturers, should you be entering into an exclusive agreement. This will provide you with security, knowing that you are the sole manufacturer of this product.
There are three types of licensing agreements:
There are many things that can (and, should) be included in an MLA. Including:
If you need help with manufacturing and distribution licensing agreements, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.