In today’s fast paced economy, in addition to their traditional applications, license agreements create the parties’ sometimes subtle temporary relationships, rights and obligations in shared work space environments, pop up stores and even artisanal food halls curated by celebrity chefs.  The use of a license agreement may also reflect a landlord’s desire to avoid the increasingly burdensome framework inherent in the landlord/tenant relationship. Owners and users of real estate need to understand the many potential applications of a license agreement.

Traditionally, licenses agreements have been used to provide rights to install and maintain communication towers and antennae, display signs, run concession stands at sporting events and other venues, gain access during construction, and use parking spaces and storage areas.

For over a century, license agreements have been used to document the concept of a shop within a shop.  For example, in a department store cosmetics section, many or all of the brands will display their products in close proximity to those of other brands, yet each brand retailer is a separate and distinct business operation.  The respective rights and obligations of the store owner and the licensee are memorialized in a license agreement. This is also the case with designer shops in stores such as Bloomingdales, Saks Fifth Avenue or Macys.  The designer will sell its products pursuant to a license agreement, and the department store will have the right to terminate the license if, for example, the licensee’s branding is no longer compatible with that of the store or if certain sales targets are not met.  Often the licensee will invest large sums to fixture and fit out its designated area to capitalize on its exposure in the department store and the department store will want them to remain as long as both parties are profiting from the relationship.

License agreements provide an attractive flexible short term use option for a specific limited purpose whereby a retailer can experiment with a location or create a splash in a heavily trafficked area that it could not afford otherwise.  Because there is typically not a large fit out investment, users are agreeable to the licensor’s right to terminate at will upon notice.  In fact, in certain circumstances, there might not even be a grant of a specific space to the user.  For example, in a retail context, the pop up space can be integrated into another non –exclusive use such as where an art gallery agrees to place a certain number of pictures on its walls  or a cigar vendor has the right to have a  concession stand at a hotel.

We live in a fast changing world where information is exchanged via social media at hyper-speed and flexible short term associations are increasingly important. The license agreement is an often over-looked instrument that can be adapted to a myriad of different transaction types to create win/win situations for the parties.

co-author: Diane Schottenstein