At their core, specialty food businesses are collaborative, needing to work with various partners to ensure the success of a product, including co-packers, distributors, and consultants. A license agreement or strategic partnership agreement is necessary to protect the success of these relationships and a brand’s final product.
During last week's, SFA In the Know webinar, “Anatomy of a License or Strategic Partnership Agreement,” David Postolski, partner at Gearheart Law, broke down the most important aspects of these contractsand explained considerations that help protect all parties involved.
Postolski said the following five aspects are critical, yet tend to be left out when people go to attorneys to help prepare a contract:
• Royalties: How is everyone making money here?
• Marketing: Who is in charge of marketing?
• Exclusivity/Confidentiality: This will help protect your intellectual property or trade secret.
• Terms—This will give parties a way out of the agreement without resulting in a breach of contract.
• Non-compete/Non-Solicit: A statement preventing a company from doing business with a brand directly competing with a contracting entity.
When considering these terms, he suggested taking the time to discuss them with the contract partner(s) before finalizing the agreement.
“There is no one size fits all…[everything] that we are talking about is negotiable,” Postolski said. “I’m a big believer in that these agreements should only be handed over to your attorney only after you and your strategic partners and licensees/licensors figure the terms out.”
Because these types of contracts are so unique, he advises against the use of templates found on the internet since they may fail to meet the needs of a partnership and falsely place importance on details that can hurt one or more businesses involved.
For nearly every relationship among food makers in the specialty food industry, a collaboration involves creating, disseminating, or marketing a food product, according to Postolski. Because this will inevitably put the trust of a maker’s brand into another entity, it is necessary to consider quality control in these contracts, even in instances where the partner does not handle the physical product. In influencer marketing, for example, an influencer will be able to affect how a brand is portrayed or characterized, which a company would like to be able to control. Postolski advises putting checks into place to verify the quality of the content that is being disseminated is in line with the brand’s story and standards.
To learn more about how to construct and carry out a licensing agreement or strategic partnership contract, watch the webinar on demand in the SFA Learning Center.
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