Some people license their intellectual property to other companies just to obtain sizable licensing fees. Quality, however, is something you should not overlook. Products created from your IP should enhance the reputation of your brand and do nothing to degrade it.
Quality control is a part of many licensing agreements and is a major component of the quality control process overall.
Due diligence of licensees
A primary step before negotiating with a licensee is to first examine your prospective client. Red flags can show themselves during the due diligence stage, including an abundance of litigation against the company, excessive debt and shady or incomplete profit information. This may indicate the licensee is unlikely to treat your IP with proper care and respect.
Quality provisions in a licensing agreement
Once you have found a reputable licensee, you can negotiate a contract that gives you sufficient control over what your licensee creates with your IP. A common provision is to allow a licensor to have first approval over different aspects of the production, which may include product designs and the materials used for the products, plus packaging and advertising for the products.
Your licensing agreement can also grant you the right to intervene at different stages of the production. Under your contract, your licensee may have to give you prototypes of the product and packaging mockups before going into production. Another provision is to give you samples of the finished products at certain intervals.
Disposal provisions
IP holders also use licensing agreements to address disposing of products that do not meet quality standards or could otherwise sully their IP. This may include insisting on the destruction of unapproved prototypes. You might also want disposal of unsold stock if you find it unacceptable to sell it on a discount market.
Licensing agreements can greatly vary, but no matter your situation, you should feel confident that a licensee will not churn out product that damages the image of your IP and your brand.