Licensing glossary
Licensing glossary: the terms every licensing team uses
Licensing has a language of its own. New starters hear MG, sell-off and recoupment in their first week, and even seasoned teams use the same word in different ways. This licensing glossary explains the terms every licensing team uses, from licensee and licensor to tiered royalty rates.
Each definition is short and plain. Where a term connects to how Flowhaven works, we link to the relevant part of the platform.
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A
Advance
The part of the minimum guarantee a licensee pays up front, usually at signing. It is recouped from royalties earned later, and is part of the guarantee rather than an extra payment.
Approval stages
The checkpoints a licensed product passes before it reaches the shelf. Typical stages are concept, pre-production and production sample, each reviewed against the style guide. In Flowhaven, product approvals run through configurable stages with clear roles to submit, review, approve and observe.
Audit rights
A clause that lets the licensor inspect the licensee’s books to confirm royalties were reported correctly. Audits look back over time, so checking each statement on arrival catches more, sooner.
B
Brand assurance
The team and process that keep licensed products true to the brand. Brand assurance reviews submissions, writes feedback and signs off each approval stage.
C
Category
The type of product a licence covers, such as apparel, toys or homeware. Agreements grant specific categories, and sales reported outside them should be flagged.
Channel
Where licensed products are sold, for example mass retail, specialty stores or online. Some agreements grant or restrict channels, and rates can differ between them.
E
Exclusivity
A promise that the licensor will not grant the same rights to anyone else. Exclusivity is usually limited to a category, territory or channel, and often comes with a higher minimum guarantee. Read more at Cornell Law School
F
Factory audit
An inspection that confirms a factory meets agreed social, safety and quality standards. Licensors often require a valid audit before production starts. In Flowhaven, only factories with a valid audit can be selected when a licensee submits a product.
G
Guest users
People outside your company, such as licensees, agents, retailers and factories, who log in to work with you. In the Flowhaven partner portal, guest users are unlimited.
L
Licence agreement
The contract that sets out what the licensee may make, where and when they may sell it, and what they pay. It covers the property, categories, territory, term, royalty rate and minimum guarantee. Read more at the UK IPO
Licensed product
Any product made under a licence that carries the licensor’s brand, character or artwork. Each one should be approved before it is produced and reported once it sells.
Licensee
The company that pays for the right to use a brand or IP on its products. The licensee designs, makes and sells the licensed products, and reports sales and royalties to the licensor. Read more at Cornell Law School
Licensing agent
A company that manages licensing on a licensor’s behalf. Agents find licensees, negotiate deals, run approvals and collect royalties, usually in return for a share of royalty income. Read more at Licensing International
Licensor
The owner of the brand or IP who grants the licence. The licensor sets the terms, approves products and receives royalties. Read more at Cornell Law School
LRM (licensing relationship management)
Software built to run a licensing programme end to end: agreements, approvals, brand assets, royalties and partner relationships in one system. Flowhaven is an LRM platform built on Salesforce.
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M
Marketing fund
Money licensees contribute, usually a percentage of sales or a fixed sum, for the licensor to promote the property. When several licensees pay into one pot, it is often called a common marketing fund.
Minimum guarantee (MG)
The royalty a licensee commits to pay even if sales fall short. Track it per instalment, or the shortfall quietly goes uncollected. Read more in our guide to minimum guarantees in licensing.
O
Overage
Royalties earned above the minimum guarantee. Once the guarantee is fully recouped, every extra royalty is paid to the licensor as overage.
P
Property (IP)
The brand, character, artwork, team or other intellectual property being licensed. One licensor may manage many properties, each with its own style guide and deals. Read more at WIPO
R
Recoupment
The process of counting royalties earned against the advance and minimum guarantee already paid or committed. Recoupment continues until the guarantee is covered.
Renewal
Extending a licence agreement for a new term, often on updated terms. Renewal dates need tracking well ahead, so you can decide whether to renew, renegotiate or let the deal end. Flowhaven agreement management flags renewal and expiry dates.
Royalty rate
The percentage of sales, usually net sales, that the licensee pays the licensor. Rates can vary by category, channel or territory within one agreement. Read more at Cornell Law School
Royalty statement (royalty report)
The report a licensee sends each period showing sales and the royalties due. In Flowhaven, licensees report line by line in the portal and every line is checked against the agreement in royalty management.
S
Sell-off period
The window after a licence ends when a licensee can still sell existing stock. Track the end date, or stock keeps selling long after the rights do.
Shortfall
The gap between royalties earned and the minimum guarantee at the end of the term. The shortfall is still due from the licensee, but only if someone invoices it.
SKU
A stock keeping unit, the code for one specific product. Royalty reports should only include SKUs that were approved under the agreement.
Style guide
The rulebook for using a brand or property: logos, colours, fonts, artwork and dos and don’ts. Licensees design from it, so everyone needs the latest version. In Flowhaven, brand assets and style guides are shared once, and you can see which partner has the latest version.
Sublicence
Permission for a licensee to pass some of its rights to another company, such as a manufacturer or regional distributor. Most agreements forbid sublicensing unless the licensor agrees in writing. Read more at Merriam-Webster
T
Term
How long a licence agreement runs, from start date to end date. Minimum guarantees, instalments and renewal dates are all set against the term.
Territory
The countries or regions where a licensee may sell licensed products. Sales reported outside the granted territory should be flagged before you invoice. Read more at WIPO
Tiered royalty rate
A tiered royalty rate steps up once sales pass a threshold. If nobody checks the threshold, the rate never steps up.
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