Drafting and Administering a Trademark License: A Practical Guide

Document type: Guide Practice area: Intellectual Property — Trademarks Jurisdiction: United States (federal and state) Last reviewed: 5 September 2026

The example

Tessellate Athletics is a Portland performance-apparel company with $71 million in revenue and a mark consumers genuinely care about. Adaeze Kowalczyk-Rune runs brand; Milo Fontaine-Adeyemi is the general counsel and has never built a licensing program.

The board has approved three licenses: footwear with a Massachusetts manufacturer, eyewear with a mid-sized optical company, and a distribution-plus-manufacturing license for South Korea. The revenue projection is $4.2 million a year by year three. The risk, which nobody on the board has thought about, is that a badly run licensing program can damage the brand faster than it monetizes it — and in the worst case can put the mark itself in question.

This guide is the sequence Fontaine-Adeyemi followed.

Step 1 — Decide whether to license at all

Licensing is a decision to let someone else make things with your name on them. It is right when the licensee has capabilities you do not — manufacturing, channel access, category expertise — and when the category is genuinely adjacent to what your brand means. It is wrong when it is purely a revenue exercise.

Ask three questions.

Does the category fit what the brand stands for? Tessellate means technical performance. Footwear and eyewear fit. A licensing broker's proposal for TESSELLATE-branded luggage did not obviously fit, and the brand team declined it — correctly, because a mark stretched across unrelated categories eventually means nothing in particular.

Can we control it? Every license creates a quality control obligation. If you cannot inspect the goods, evaluate the specifications, or judge the output, you should not license the category. Tessellate had no optical expertise and solved this by engaging a third-party testing lab named in the agreement, which is the right answer and a real cost.

What does failure look like? A licensee that makes a bad product damages the brand across every category, not just its own. Model the downside honestly before modeling the royalty.

Deliverable: a one-page category strategy identifying which categories are licensable, which are core and will never be licensed, and which are open questions. Signed off by whoever owns brand.

Step 2 — Fix the trademark house before you license

You cannot license what you do not clearly own, in the classes you are licensing, in the countries where the licensee will operate.

Confirm ownership. One clean chain of title, recorded. Watch for marks registered in a predecessor entity, a founder's name, or a subsidiary that has since been merged. Fix these now; they are cheap to fix and expensive to explain to a licensee's counsel.

Confirm registrations cover the licensed goods. A registration for apparel in Class 25 does not cover eyewear in Class 9. If you are licensing a category, file in that class — and file before the license is announced, because announcements attract opportunistic filings.

Clear the new categories. A clearance search in each new class, in each licensed country. Tessellate discovered a prior user of a similar mark for eyewear in two states, which changed the eyewear license's territory and saved a dispute.

Check the international position. Most of the world is first-to-file. Register in every country where you will license before you license there. This is the most common and most painful failure in international brand licensing, and it is entirely preventable.

Confirm maintenance is current. Renewals, declarations of use, and any pending office actions. A licensee performing diligence will find lapses, and the discovery is not a good look.

Build the style guide. A document specifying the mark's correct form, colors, clear space, permitted lockups, prohibited uses, and required notices. It becomes an exhibit to every license and does most of the day-to-day quality control work.

Step 3 — Choose the licensee

The single largest determinant of whether a license program works is who you pick. Contract language mitigates a bad choice; it does not fix one.

Diligence the operation, not just the balance sheet. Visit the factory. Look at products they make for other brands. Talk to two of their current licensors. Ask what their quality failures have been and what they did about them.

Ask about their other brands. A licensee with a portfolio of brands positioned below yours will treat your line as a premium version of the same product, which is not what you want. A licensee whose other licensors are demanding will already have the systems you need.

Assess their compliance culture. Do they have a quality management system? Who signs off on production? What happens when a run fails? A licensee that cannot answer these questions crisply will not answer your approval requests crisply either.

Check the financials seriously, including for an insolvency scenario. After Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. 370 (2019), a rejected trademark license does not terminate — which protects licensees and means a distressed licensee's use of your mark may be harder to stop than you assume.

Meet the people who will actually do the work, not the business development team that is selling you the deal.

Step 4 — Structure the economics

Royalty rate. Typically a percentage of net sales, with "net sales" defined with real care — what deductions are permitted (returns, trade discounts, taxes, freight) and what are not (marketing costs, uncollectible accounts, affiliate transfers at non-arm's-length prices). Rates vary enormously by category; get comparables rather than guessing.

Minimum guaranteed royalties. The most important economic term after the rate. A minimum converts the license from an option into a commitment and gives you a clean termination right when the licensee under-performs. Set minimums by year, escalating, tied to a business plan the licensee provides.

Advance. Often credited against minimums. It demonstrates commitment and funds your program administration.

Marketing commitment. A stated percentage of net sales spent on marketing the licensed products, with reporting. Without it, the licensee free-rides on your brand spending.

Sales thresholds and category expansion. Structure additional categories or territories as earned expansions rather than granting everything upfront.

Payment mechanics. Quarterly, within 30 days of quarter end, with a royalty report in a specified format, plus interest on late payments. Currency and withholding tax treatment for international deals.

Deliverable: an economic term sheet agreed before drafting begins. Drafting an agreement while the economics are still moving wastes everyone's time.

Step 5 — Draft the scope provisions

Scope disputes are the most common licensing disputes and they are almost always caused by imprecise drafting.

Licensed marks. Listed by registration number, with the style guide incorporated. Specify whether the licensee may use the marks in combination with its own marks and in what form.

Licensed products. Enumerated, not categorized. "Footwear" invites an argument about slippers, sandals, and boots. List the product types, and add a mechanism for adding products by written amendment.

Licensed territory. Named countries. Then address online sales expressly: whether the licensee may sell through its own site, through marketplaces, whether geo-restriction is required, and what happens when products reach other territories. A territorial license with unaddressed e-commerce is a territorial license in name only.

Licensed channels. Which classes of trade — specialty, department stores, mass, off-price, direct-to-consumer, marketplaces. Off-price and marketplace channels deserve explicit treatment; unauthorized diversion into discount channels is a recurring brand problem.

Exclusivity. State the type expressly. Exclusive means even the licensor may not use the mark on those products in that territory; sole means the licensor may but no other licensee; non-exclusive means anyone. Ambiguity here has produced more litigation than it should. Any exclusivity should be conditioned on performance.

Reservation of rights. Everything not expressly granted is reserved. Say it.

Step 6 — Build the quality control architecture

This is the part of the agreement that protects the mark itself. Under 15 U.S.C. § 1055, a licensee's use inures to the licensor's benefit because the licensee is a related company — defined in 15 U.S.C. § 1127 as one whose use is controlled by the owner with respect to the nature and quality of the goods. Without control, the license is naked and the mark can be deemed abandoned.

Standards. A schedule of product specifications: materials, construction, performance, safety, testing, labeling, and packaging. Specific enough to test against. Draft it with the product team, not alone.

Pre-production approval. No commercial production before written approval of a production sample. Define the submission (how many samples, what documentation), the review period, and the consequence of silence. This is the most important operational control in the agreement.

Artwork and marketing approval. Every use of the mark approved in writing before use: packaging, hangtags, labels, advertising, website, social media, trade show materials, and press releases. Incorporate the style guide.

Production sampling. Periodic samples pulled from actual production, at a stated frequency, tested by the licensor or a named laboratory.

Inspection. The right to inspect manufacturing facilities on reasonable notice, including third-party facilities, at least annually. And a commitment internally to actually do it — an unexercised inspection right is worse than none, because it shows you knew control was needed.

Complaints and incidents. The licensee must report consumer complaints above a threshold, warranty claims, returns data, recalls, and any regulatory or governmental contact, promptly.

Corrective action. A defined process: notice of non-conformity, a cure period appropriate to the severity, the right to require the licensee to stop production or withdraw product, and the right to terminate for repeated or serious failures. Product safety issues get a separate, faster track.

Compliance obligations. Applicable product safety and labeling law, restricted substances, and — increasingly non-negotiable — supply chain, labor, and sourcing standards, with audit rights and the right to reject a subcontractor.

Records. Require the licensee to keep production, testing, and complaint records for a defined period and to make them available. And keep your own records of every approval, inspection, and rejection. The records are what prove control years later.

Step 7 — Ownership, goodwill, and the provisions that protect the asset

These clauses are short, standard, and load-bearing. Do not let them be cut for length.

Ownership acknowledgment. The licensee acknowledges that the licensor owns the marks, that all use of the marks and all goodwill arising from that use inures exclusively to the licensor's benefit, and that the licensee acquires no rights in the marks other than the license granted.

No registration. The licensee will not apply to register the licensed marks, or any confusingly similar mark, anywhere in the world, and will assign to the licensor any rights it acquires. This clause is the answer to the first-to-file problem, and it should be paired with an obligation to notify the licensor of any third-party filing the licensee becomes aware of.

Proper use. Use of the marks in accordance with the style guide, with correct notices, as adjectives rather than nouns or verbs, and never in a manner that would render the mark generic or dilute it. Genericide is a slow-motion disaster and licensees are a common vector.

No challenge. The licensee will not challenge the validity or ownership of the marks. Licensee estoppel applies as a matter of law during the license term in most jurisdictions; the express covenant adds something and its post-termination effect is less certain. Include it.

Notification of infringement. The licensee must promptly notify the licensor of any infringement or dilution it becomes aware of, and cooperate in enforcement. Specify who controls any action, who pays, and who recovers.

No sublicensing without consent. As a default rule, with any permitted sublicense required to bind the sublicensee to the same quality obligations and to give the licensor direct rights. A flow-down failure creates exactly the uncontrolled use the statute punishes. Note that contract manufacturers are functionally sublicensees; address them expressly rather than pretending they are not.

Assignment. No assignment by the licensee without consent, and an express statement that a change of control is an assignment. You chose this licensee; you should get to choose its successor.

Step 8 — Reporting and audit

Royalty reports. Quarterly, in a specified format, showing gross sales, permitted deductions itemized, net sales, royalty rate applied, and royalty due — by product, by territory, by channel. A report that shows only a single number cannot be checked, which is why licensees offer them.

Books and records. The licensee maintains complete records for a defined period, typically three years after the relevant period, and after termination.

Audit right. Once per year on reasonable notice, by the licensor or its designated accountants, at the licensee's premises, with access to the records needed to verify royalties and compliance.

Cost shifting. The licensor bears the audit cost, unless the audit discloses an underpayment exceeding a stated threshold — commonly five percent for the audited period — in which case the licensee pays the audit cost plus the shortfall plus interest.

Use it. An audit right that is never exercised is a negotiating point, not a control. Audit significant licensees on a rotating basis, roughly every three years. Underreporting is common and usually accidental — a finance team applying the wrong deduction to a product line — and a single audit changes reporting behavior across the entire program.

Compliance reporting beyond royalties. Annual insurance certificates. Confirmation of subcontractor lists. Quality metrics. Marketing spend against commitment. Build these into the same quarterly report so there is one deadline rather than five.

Step 9 — Termination and the exit

The exit provisions are drafted at the moment of maximum goodwill and used at the moment of minimum goodwill. Draft them for the second occasion.

Termination for cause. Material breach with a cure period, typically 30 days. Non-payment with a shorter period. Quality breaches on a separate track with a cure period proportionate to severity — and no cure period at all for a safety issue or a deliberate unauthorized use.

Termination for failure to perform. Failure to meet minimum guaranteed royalties or minimum net sales, with the remedy being termination or conversion of exclusivity to non-exclusive at the licensor's election.

Termination on insolvency and change of control. Draft them, and understand their limits: an insolvency termination clause is of uncertain effect in a bankruptcy, and after Mission Product Holdings a rejected license does not terminate. The change-of-control right is the more reliable one.

Termination for brand damage. A right to terminate where the licensee's conduct — not just its products — materially damages the brand's reputation. Negotiated hard, and worth having.

Sell-off. How long the licensee may sell existing inventory after termination, typically 90 to 180 days, at what channels and prices, with royalties still payable and reporting still required. Condition it on the licensee not being in breach of the quality provisions and on the termination not being for cause of a particular kind. From the licensee's side, negotiate a period that matches your actual inventory cycle.

Post-termination obligations. Immediate cessation of use after sell-off. Destruction or delivery of remaining goods, packaging, labels, tooling, molds, and marketing materials, with a certificate of destruction. Transfer of any domains, social handles, and marketplace storefronts incorporating the marks — enumerate them in a schedule maintained during the term, because reconstructing the list after a hostile termination is miserable. Removal of the marks from the licensee's corporate name where applicable. Return or destruction of confidential specifications. Final royalty accounting.

Survival. Which clauses survive: confidentiality, indemnity, ownership, audit, dispute resolution, and post-termination obligations.

Step 10 — Run the franchise law review

Before signing any royalty-bearing trademark license, have someone with franchise expertise read it.

A franchise exists under the FTC Franchise Rule and most state franchise statutes when three elements coincide: a trademark license, significant control over or assistance to the licensee's method of operation, and a required payment. Substance governs; what the parties call the arrangement is irrelevant.

The exposure is not theoretical. Selling an unregistered franchise in a registration state, or selling any franchise without a compliant Franchise Disclosure Document delivered in the required timeframe, can support rescission, damages, and regulatory action.

Where the line falls. Controlling the product is quality control. Controlling the licensee's business is franchising. Specifications, testing, approvals, and inspections of the goods sit on the safe side. An operations manual for the licensee's business, mandated hours or sites, required equipment purchases from designated vendors, mandated staff training programs, and required participation in the licensor's marketing program sit on the other side — or at least start the analysis.

Tessellate's footwear and eyewear licenses were clean: they controlled product specifications and nothing about how the licensees ran their companies. The Korean arrangement was closer, because it included retail store standards and a required fit-out. It was restructured to remove the store-operations elements before signing.

Related overlays to check: state business opportunity statutes, which can capture arrangements that are not franchises; and industry-specific dealer and distributor protection statutes, which restrict termination and non-renewal in categories including motor vehicles, equipment, alcoholic beverages, and petroleum products.

Step 11 — Adapt for international licenses

Register first. In first-to-file jurisdictions, file before you license and before you announce. A licensee or distributor registering your mark locally is a recurring, expensive problem.

Recordation. Ask local counsel whether the license must or should be recorded. In some jurisdictions, licensee use does not count toward the owner's use requirements unless the license is recorded — which directly affects whether your registration survives a non-use cancellation.

Use evidence. Many jurisdictions cancel for non-use after three or five years. Where the licensee is your only user, collect and retain evidence of its use, jurisdiction by jurisdiction, as a standing obligation in the agreement.

Quality control at a distance. Name a third-party inspection service in the agreement, with reports to both parties. Cheaper than travel and better evidence.

Governing law, forum, and enforcement. Arbitration with a seat whose awards are enforceable where the licensee's assets are. Consider whether you can realistically obtain interim relief — an injunction you cannot enforce is not a remedy.

Extraterritorial limits. Abitron Austria GmbH v. Hetronic International, Inc., 600 U.S. 412 (2023) confirmed that 15 U.S.C. § 1114 and § 1125(a) reach only domestic uses in commerce. Foreign misconduct by a licensee is generally a foreign-law problem, which is another reason the foreign registrations and the arbitration clause matter.

Local formalities. Notarization, legalization, translation, stamp duties, exchange control approvals, and withholding tax on royalties all vary. Budget time; several of these take weeks.

Step 12 — Onboard the licensee

Signature is the beginning of the work, not the end of it.

Hold a kickoff. Legal, brand, product, and the licensee's counterparts in one room or one call. Walk through the approval process, the submission requirements, the timelines, the contacts, and the escalation path. An hour here prevents a year of friction.

Deliver the package. Style guide, specifications, approval templates, contact list, reporting templates, and the calendar of recurring obligations.

Set up the system. A shared folder or ticketing queue for submissions and approvals, with a naming convention. Not email.

Run the first approval deliberately. The first artwork submission and the first production sample set the tone. Review them carefully, respond within the contractual period, and give specific, actionable feedback. A licensee learns from the first cycle what the standard is.

Calendar everything. Royalty report dates, insurance certificate dates, inspection dates, minimum guarantee measurement dates, renewal notice dates, termination notice deadlines, and the registration maintenance dates for every licensed mark in every licensed country.

Step 13 — Administer the program

Name an owner. One person accountable for the program. Not "legal," not "brand" — a person.

Meet the service levels. If the agreement gives you ten business days to approve and you take five weeks, you are in breach and you have undermined the argument that the approval right was real. Resource it or renegotiate the period.

Document as you go. Every approval, rejection, inspection, sample result, and corrective action, with a date and a decision-maker. This file is your evidence of control if the mark is ever challenged as naked-licensed, and it is worth more than any clause in the agreement.

Hold quarterly business reviews with each significant licensee: sales, product pipeline, quality metrics, complaints, marketing spend, and upcoming approvals. Problems surface in these conversations months before they surface in a complaint.

Monitor the market. Buy the licensed products at retail periodically and look at them. Read the reviews. Check the marketplaces for unauthorized sellers and diverted goods. What is actually on shelves is frequently not what was approved.

Watch for scope creep. A licensee that adds a product type, a channel, or a territory without an amendment is a licensee whose use of the mark is unlicensed and uncontrolled. Address it early and in writing, and amend rather than acquiesce — acquiescence in a use outside the license is precisely the uncontrolled use that creates the doctrinal problem.

Step 14 — Handle a licensee that goes wrong

Diagnose before you escalate. Quality failures, non-payment, under-performance, and brand-damaging conduct call for different responses. So does the distinction between a licensee that cannot comply and one that will not.

Paper the sequence. Notice of non-conformity, referencing the specific provision. Cure period. Written follow-up on what was and was not cured. If it continues, notice of default. This sequence is both the contractual path and, later, the evidence.

Escalate proportionately. Enhanced sampling and inspection. Suspension of approvals for new products. A requirement to withdraw non-conforming product. Suspension of the license as to a product line. Termination.

On termination for cause, move quickly on the exit obligations. Inventory count, sell-off period start date, destruction certification, domain and handle transfers, and confirmation of cessation. Continued use after termination is infringement and generally supports a preliminary injunction — the confusion is close to inevitable when the goods were authentic until recently — and 15 U.S.C. § 1116 supplies the injunctive machinery.

Consider the alternative to termination. Sometimes the right outcome is a negotiated wind-down with a longer sell-off, a transition of tooling, and a release. Litigation with a company that has your brand on its inventory is rarely the value-maximizing path.

Step 15 — Review the program annually

Licensee scorecard. Royalties against minimums, quality record, approval responsiveness, complaint volume, marketing spend against commitment, and a subjective brand-fit assessment.

Kill the bad ones. A licensee producing modest royalties and steady brand damage persists because terminating feels like work. Do the arithmetic honestly.

Check the legal foundation. Are all licensed marks registered and current in all licensed countries? Are all licenses recorded where recordation matters? Is every license within its term, and are renewal or termination notices calendared?

Audit the control file. Pick two licensees at random and ask: could we prove, from documents, that we controlled the nature and quality of their goods over the last three years? If the answer is no, fix it now rather than during a challenge.

Refresh the standards. Product specifications, the style guide, and compliance requirements all drift. Update them, and use the contractual mechanism for imposing updated standards with reasonable notice.

Step 15A — Negotiating from the licensee's chair

If you are on the other side of this agreement, the analysis inverts and a different set of provisions becomes urgent. Tessellate's footwear licensee had good counsel, and the deal was better for it.

Investment recovery. You are building a business on an asset you do not own. The term must be long enough — and the renewal mechanism certain enough — to recover tooling, inventory, channel development, and marketing. A three-year term with renewal "at licensor's sole discretion" is a three-year business with a cliff.

Approval process discipline. This is the provision that most often strangles a licensee in practice. Insist on: defined submission requirements so you know what "complete" means; a fixed response period; deemed approval if the licensor does not respond; a requirement that rejections be specific and identify what would be acceptable; and a rule that an approved item stays approved. A licensor who can reject repeatedly without explanation controls your production calendar.

Standards changes. Licensors reserve the right to update specifications. Require reasonable advance notice, a transition period, and a mechanism for existing inventory and committed purchase orders that a change would render non-compliant. Otherwise a mid-season specification change is your loss.

Warranties and indemnity on the mark. That the licensor owns the marks, that they are registered as represented in your territory, that there is no pending challenge or conflicting license, and an indemnity for third-party claims arising from your authorized use. You cannot diligence this risk away and you certainly cannot control it.

Maintenance and enforcement obligations. An affirmative obligation on the licensor to maintain the registrations in your territory and to take reasonable action against material infringers — or, failing that, to permit you to act at your own cost with a share of recovery. An exclusive licensee whose licensor lets the registration lapse has bought nothing.

Insolvency and step-in. After Mission Product Holdings your license survives rejection, but the licensor's performance does not. Negotiate escrow of specifications and style guides, a right to maintain the registrations yourself if the licensor fails to, and a set-off right against royalties for costs you incur.

Minimums that reflect reality. Minimum guarantees should follow a business plan you believe, with relief for events outside your control — a supply disruption, a regulatory change, a licensor delay in approvals. Tie the minimum to the licensor meeting its own obligations.

Sell-off. Ninety days does not clear a seasonal apparel inventory. Negotiate for the period your business actually needs, and resist conditioning it on being free of any breach — a trivial reporting default should not strand your inventory.

Change of control. Licensors want a consent right; you want the deal not to evaporate if you are acquired. A middle path is consent not to be unreasonably withheld, with objective criteria — the acquirer is not a competitor of the licensor, meets defined financial tests, and assumes the agreement.

Step 16 — Special structures you may be asked to build

The IP holding company. Many groups hold marks in a separate entity that licenses them to operating affiliates, for tax, financing, or risk-isolation reasons. The structure is standard and entirely lawful — and it carries the same quality control obligation as any other license. The holding company must actually control the nature and quality of the affiliates' goods. Being affiliates is helpful evidence, not a substitute. Give the holding company a real intercompany license with real standards and a real approval process, and keep the records. Auditors, lenders, and eventually an acquirer's counsel will look.

Co-branding. Two marks on one product creates two quality control obligations running in opposite directions and a set of questions the parties usually skip: who approves the combined presentation, who owns the lockup that was designed for the collaboration, who fields consumer complaints, what happens to inventory when the arrangement ends, and whether either party may use imagery of the collaboration afterwards. Draft the ownership of the combined design expressly; it is a joint work problem wearing a trademark hat.

Ingredient and component branding. A "made with" arrangement, where your mark appears on someone else's finished product, gives you less control over the finished good than a full license and more exposure to it. Define exactly where and how the mark may appear, require approval of the finished product's presentation, and be clear in the agreement — and in the packaging — about what your mark is certifying.

Certification marks. If what you are running is really a certification program, structure it as one. A certification mark owner may not itself produce the certified goods, must apply the standards without discrimination, and must control the use of the mark; failure on any of these is a ground for cancellation under 15 U.S.C. § 1064. A "license program" that is functionally a seal-of-approval scheme is in the wrong legal box.

Character, entertainment, and personality licensing. Approval rights extend beyond product quality to depiction, context, and adjacency — where the product appears and what it appears next to. Style guides carry the load. Where a real person's name or likeness is involved, right-of-publicity law applies alongside trademark law, and the individual's approval rights typically run the other direction from ordinary quality control. Endorsement arrangements also carry FTC disclosure obligations for material connections; build the disclosure requirement and a compliance check into the agreement.

Charitable and cause licensing. Commercial co-venture statutes in a number of states regulate arrangements where a product's sale is represented to benefit a charity, imposing registration, contract, and disclosure requirements. This catches ordinary brand collaborations more often than people expect.

Step 16A — Assignments, security interests, and moving the mark

A licensing program eventually intersects with a transaction, and marks move differently from other assets.

Assignments must carry the goodwill. 15 U.S.C. § 1060 permits assignment of a mark "with the good will of the business in which the mark is used, or with that part of the good will of the business connected with the use of and symbolized by the mark." An assignment of the bare mark — an assignment in gross — is invalid, and the mark may be treated as abandoned. Recite the goodwill, and transfer the associated assets in fact: recipes, specifications, customer lists, supplier relationships, know-how, and the license agreements themselves.

Intent-to-use applications have a special rule. An application filed on an intent-to-use basis generally may not be assigned before a verified statement of use is filed, except to a successor to the applicant's ongoing and existing business to which the mark pertains. A violation can void the resulting registration — a real and recurring trap in early-stage acquisitions where the target's marks are still in the application stage.

Record the assignment. Recordation with the USPTO under 15 U.S.C. § 1060 protects against a subsequent bona fide purchaser, and the certificate machinery in 15 U.S.C. § 1057 governs how ownership appears of record. Record in every foreign jurisdiction that requires it, on that jurisdiction's timeline.

Security interests. Lenders take security in marks. The mechanics involve UCC filings plus, commonly, a recordation with the USPTO. Understand what your credit agreement permits before granting a license — many facilities restrict licensing of collateral, and an exclusive license of a core mark can be a disposition requiring consent.

Assignment of the license agreements themselves. When the marks move, the licenses should move with them, and the licenses' own assignment provisions govern whether they can. Check them before signing a purchase agreement, not after.

Step 17 — Prepare for the diligence you will eventually face

Every licensing program is eventually examined by someone else's lawyers — in a financing, an acquisition, a credit facility, or litigation. What they will ask for is predictable, so keep it ready.

The license schedule. Every agreement, with parties, marks, products, territories, term, exclusivity, economics, and status.

The registration schedule. Every licensed mark, every jurisdiction, registration number, class, status, next maintenance date, and whether the license is recorded where recordation matters.

The control file. Approvals, inspections, sample results, corrective actions — organized by licensee and by year. This is the file that answers the naked licensing question, and assembling it retroactively is far harder than maintaining it.

The royalty file. Reports, payments, audits, and any disputes.

The exceptions memo. Known issues, stated plainly: the licensee operating slightly outside scope, the country where registration is pending, the agreement with the deemed-approval clause you would not sign today. Diligence teams find these anyway; a company that has already identified them looks like a company that runs its brand well.

A program that can produce these five things in a week is a program whose value shows up in the transaction. A program that cannot spends six weeks assembling them under pressure and gives the other side a reason to discount the brand.

Where Tessellate landed

Eighteen months in: footwear performing at 140% of plan, eyewear at 60% and on notice, Korea restructured out of franchise territory and running well. One person owns the program at 60% of her time. The approval queue turns in six business days against a ten-day commitment. There is a folder with 900 approvals in it.

Fontaine-Adeyemi's summary to the board was three sentences, and it is the right summary of this entire guide: "We are making money on the brand without diluting it. The reason is that we control the product and we can prove it. The day we stop being able to prove it is the day the license program becomes a liability."