Licensing and franchising - how a brand or a technology earns money without losing control
A registered mark or a granted patent generates nothing on its own: the asset turns into revenue only when someone else is allowed to use it for a fee. That is where the risk owners tend to notice too late begins - the licence was granted orally or by a one-page letter, there is no quality control, the territory is vague, and once the relationship ends the partner carries on trading under the same brand.
This page covers the legal side of commercialising intellectual property: what separates a licence from an outright assignment, how territory, term, royalty and quality control are drafted, why a licence needs recording to bind third parties, how a franchise package is assembled, and what an IP audit examines before an investment or a sale. Trademark filings, patents and enforcement are covered on their own pages.
Five models for making IP pay
The model you pick decides what you keep afterwards: control, ownership, or only the money.
Building the deal - from audit to recordal
Verifying the chain of title
The first question is whether you actually own what you are licensing out: whether the mark is registered and in whose name, whether patent fees are paid up, whether assignments exist from the authors of the code, whether the design came across under contract. A transaction that skips this check falls apart at the first complaint.
Choosing the model and the economics
The lawyer works with the client to define what is being sold: a one-off right, exclusive access to a single market, or a full franchise package. The payment structure is set here too - entry fee, percentage of turnover, minimum royalties, fixed instalments or a combination, along with the reporting and inspection regime.
Drafting the operative clauses
The agreement records the subject matter (which mark, which classes, which version), territory, term and renewal, whether sublicensing is allowed, quality standards and how they are policed, approval of advertising, confidentiality, the duty to report infringements, liability caps and the forum for disputes.
Writing the exit scenario
This is the most commonly omitted part: what happens once the term expires or the contract is breached - how quickly use of the brand must stop, what becomes of remaining stock and marketing materials, whether the partner keeps the customer database, whether a non-compete applies and for how long. Without this, every termination becomes a dispute by default.
Recordal and publicity
Licences and assignments are recorded at Sakpatenti so that they take effect against third parties; this matters for enforcement, for customs recordal, and in dealings with banks and investors. The lawyer prepares the filings and follows the entry through to completion.
Monitoring and enforcement
Work does not stop when the deal closes: reports are checked for accuracy, use of the brand is measured against what was agreed, territory limits and the absence of sublicences are verified. A breach triggers a formal notice with a cure period first, then termination and a claim.
What an investor checks and why deals stall
Due diligence before an investment in or a sale of a technology company always opens with the same question: does the company own what it is selling? Three defects recur in practice - the founder built the product before the company existed and never assigned the rights in writing; part of the code was written by freelancers with no contract; the brand is registered to an individual while the contracts are signed by the company. Each of these can be fixed, but papering them retrospectively costs time and bargaining power.
The second block is open source. A product built on third-party libraries is bound by the terms of their licences: some require nothing more than attribution, while others require derivative works to be distributed on the same terms, which is critical for a closed product. An audit produces a component inventory with the licence attached to each one and shows where incompatibilities sit, before the buyer's lawyers find them.
The third block is structure. Where a group holds several entities - a Georgian operating company and a foreign holder, for instance - it matters whose balance sheet carries the IP, on what terms it is licensed within the group and whether those terms match market levels. Intra-group royalties set at the wrong level are a tax exposure, and IP held in the wrong place often forces an investor to restructure the deal. The lawyer assembles all three blocks into a single map: who owns it, who uses it, on what legal basis, and what happens if the partners fall out.
The clauses where money and control leak away
- Territory and channels
- Naming a country is no longer enough: online sales and marketplaces erase borders. The contract should name the language, the domains, the marketplaces and the treatment of passive sales.
- Minimum royalties
- The safety switch of any exclusive licence: if the partner misses the minimum, exclusivity converts to a simple licence or the contract ends. Without it a market can lie idle for years.
- Quality control
- In a brand licence this is not only commercial but a matter of protecting the right itself: an owner who does not police quality damages the brand and weakens its own position in future disputes. Standards, inspection rights and consequences all have to be written down.
- Improvements
- Who owns a modification or a local adaptation created by the partner. Silence here guarantees a future argument, particularly in technology licences.
- Audit rights
- A percentage of turnover only works if you can verify the reports: how often, at whose expense, and what follows if a shortfall is confirmed.
- Post-termination period
- A transition window to sell off stock, the duty to remove branding, transfer of domains and social media pages, the fate of the customer database, and the length of any non-compete.
What to prepare before granting a licence or a franchise
- Registration documents: the trademark certificate with its classes, the patent, the design registration and proof that fees are paid.
- The chain of title: assignments from founders and contractors, the relevant clauses of employment contracts.
- The brand book and quality standards; for a franchise, the operations manual.
- The economic model: entry fee, royalty rate, minimums, reporting format and deadlines.
- The technical composition of the product: third-party components and their licences where software is involved.
- The group structure: whose balance sheet holds the IP, which entity signs the contracts and how payments flow.
Three deals and what they taught
The franchise that would not stop after termination
A chain terminated a regional partner for breaching standards, but the partner carried on running the outlet under the same brand, because the contract said nothing about post-termination duties. The lawyer sent a demand based on trademark rights, obtained interim relief prohibiting use of the signage and marketing materials, and filed for damages, while in parallel rewriting every franchise agreement in the network to include a proper termination procedure.
The exclusive licence that froze a market
A manufacturer gave a distributor exclusivity across the whole country for five years without any minimum volumes; two years in, sales had all but stopped. The lawyer reviewed the contract, found grounds for termination in the duty of good faith and the obligation to pursue the contractual purpose, and negotiated an exit against compensation; the replacement agreement carried minimum royalties and automatic loss of exclusivity if the plan is missed.
The investment that stalled over open source
A startup deal froze at the final stage when the buyer's technical review found a component whose licence cast doubt on distributing the product in closed form. The lawyer ran a full component inventory, replaced the problematic library, documented the authors' rights and negotiated narrow warranties in the agreement. The deal resumed within three weeks.
Questions about licensing and franchising
Licence or sale of the right - which is better?
If you want the asset to stay with you and the income to repeat, a licence is the right answer: you control quality and territory and you can end the relationship. An outright assignment belongs to situations where the business is being sold or an investor insists on holding the whole right; the price is paid once and there is no way back. The middle path is an exclusive licence with firm minimums.
Is an oral agreement or a short letter enough?
A relationship may formally exist, but this is precisely where most disputes originate: nothing is said about territory, term, termination or quality, and an unrecorded licence is weak against third parties. Tax questions also arise over how the payments are characterised. At a minimum the document must cover subject matter, territory, term, remuneration, quality and termination.
Is franchising governed by a dedicated statute?
Georgia has no detailed special regime for franchising, so it rests mainly on freedom of contract together with intellectual property and competition rules. In practice that means you are protected to exactly the extent the agreement says you are, especially on standards, inspection and termination.
I am taking a franchise from a foreign brand. What should I watch?
Above all, whether the franchisor actually holds protection for the brand in Georgia - if not, you are paying for a right that belongs to nobody here and that a competitor could register. Then: how exclusive your territory is, supply and pricing terms, mandatory purchases, the marketing contribution, exit conditions and the dispute forum, since foreign arbitration is often an expensive proposition for a small partner.
Do royalties have tax consequences?
They do. Licence payments, particularly cross-border ones, may be subject to withholding at source and may require a treaty to be applied, while intra-group rates have to reflect market terms. An agreement of this kind should therefore be reviewed jointly by an IP lawyer and a tax specialist before signature.
Lawyers for IP transactions
In licensing and franchising a single clause can decide years of revenue. The coordinator will put you through within 15 minutes to a lawyer who handles IP deals and audits.
No published lawyers in this category yet
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Call: 568 330 318Other intellectual property services
About to license out your brand or technology - or has an investor asked for the paperwork?
In a free consultation the lawyer will check who owns the rights, which model fits your objective, and which clauses your existing agreement is missing on termination and quality control. A coordinator rings you back within 15 minutes.