January 15, 2021 | less than a minute read

License Agreement accommodations in the time of Covid

Taylor English

Licensing arrangements between licensors and licensees are or should be viewed as true partnerships, with each party having a vested interest in long-term success. Licenses are being revisited or changed in the wake of the pandemic. Accommodations may take different forms. For example, licensees are seeking reductions or extensions for minimum guarantees. While each party faces financial challenges, it's in neither party's long term interest for a licensee to find itself underwater.

Accommodations that took hold as the pandemic arose took lots of different forms. One licensee executive said she negotiated 30% reductions in minimum guarantees in some agreements, a couple of points off the royalty rate in others. In some cases, a renegotiated agreement meant giving licensees 18 months, instead of 12, to earn out the MG. And one corporate licensor took licensing agreements on a “case-by-case” basis where if a licensee wasn’t going to hit its MG for a given quarter in 2020, they would get up to a one-time 25% reduction for that specific period.