Issues to Consider When Drafting Your Cannabis Licensing Agreement

marijuana cannabis brand licenseLast 7 days I had the pleasure of attending the Worldwide Trademark Association’s (INTA) Annual Assembly in Seattle, where trademark practitioners from around the environment convened to geek out on all items model-linked. A single of the prevalent topics of discussion was trademark licensing. When we have talked over at duration some of the issues of getting into into Mental Assets (“IP”) licensing promotions in the hashish business, I imagined it would be practical to examine a number of of the critical licensing conditions talked over at INTA that should really be negotiated in any trademark licensing offer, regardless of the business.

  1. Royalties

How payment will be structured is a pillar of any trademark licensing offer, and the way that royalties are structured can normally be a supply of competition involving the licensee and licensor. In the hashish business, you are going to need to have to contemplate what royalty constructions are permissible beneath state hashish guidelines, and what implications a royalty centered on earnings will have on your state hashish license. For instance, in Washington Condition, a licensing offer with a royalty composition centered on earnings or earnings would bring about the “true celebration of interest” demands beneath the Liquor and Hashish Board’s rules. In California and Oregon, using a royalty centered on earnings or revenue will qualify you as a “financial desire holder” in a licensee.

Other issues include regardless of whether to ask for a lump sum payment up entrance (which is a little something that a licensor may be in favor of, but that may possibly be burdensome to a start out-up licensee). You are going to also need to have to ascertain the frequency of payments and what variety of accounting ought to be provided to the licensor.

  1. Use of the certified property

In typical, a licensor will want to work out as a lot handle as possible around the use of the certified IP, where a licensee will probably desire a lot more versatility. This can be a specially tough issue in a really controlled business like hashish, where state rules normally limit the handle a licensor can work out around particular components of the use of the IP. It is consequently significant for both parties to have a solid grasp of state hashish rules as they pertain to the use of the certified IP.

  1. Good quality handle

As with use of the certified property, a licensor will want to manage as a lot handle around the high-quality of the products and solutions sold beneath its certified model(s) as possible. In point, licensors ought to work out ample handle around the high-quality of the products and solutions manufactured pursuant to the license, or danger getting rid of their trademark legal rights to abandonment. A licensee on the other hand will ordinarily desire a lot less stringent high-quality handle provisions and will at least request provisions that supply it with an opportunity to overcome or mitigate ahead of license termination. A licensor may involve that provisions granting an opportunity to overcome be limited in particular approaches, this kind of as in the celebration of a breach that would trigger major reputational hurt to the licensor.

  1. Indemnification

Indemnification and limitation of legal responsibility are normally closely negotiated, where a licensor will both parties will ordinarily involve indemnification from the other for a selection of IP infringement and item legal responsibility challenges.

  1. Morality

This is one particular of the a lot more appealing topics that was talked over at INTA, and is one particular that looks specially appropriate specified several latest situations. A morality clause may be bundled in any licensing settlement, but is specially appropriate in agreements involving personal stars that are collaborating with manufacturers. These agreements are turning out to be a lot more and a lot more prevalent in the hashish business. A morality clause will supply for termination of the settlement in predicaments where a party’s ethical perform does not conform with the requirements provided for in the settlement. This could be limited to criminal acts, but need to have not be. The critical is to plainly spell out all scenarios that could guide to termination in the settlement, and if a celebration to an settlement poses unique concerns to the other side, all those concerns may be tackled by means of a morality clause.

Hashish licensing promotions are distinctive, and although these kinds of clauses may show up in any licensing settlement, the approaches in which the parties strategy them will be distinctive, and will change from jurisdiction to jurisdiction. As constantly, this makes it significant to integrate a hashish regulatory investigation into any IP licensing offer.

For a lot more on hashish IP licensing, check out the next:

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