You’ve created a cool design and are now ready to license it out to your favorite apparel houses and make lots of money. The following are just a few of the key issues you should look out for in your licensing transactions.

Foremost, you need to have enforceable rights to the design and legal protection wherever you license it. It is a good idea to apply for a trademark registration for your design before you launch your licensing endeavor. Unless you have a registered United States trademark, you will have difficulty in enforcing your common law trademark rights outside of the limited general areas where you have been using your design in your trade. If you have not yet applied for a trademark, invest in a good trademark search to make sure that you will be able to get a registration.

Also, if you plan on licensing your design in other countries, keep in mind that a trademark registration in the United States will have little, if any protection, for an infringement in foreign countries. It is critical that you file for a registration in the applicable countries where your licensees will be using the trademark, otherwise you will have little rights to license your designs and little protection when someone decides to use a similar design to compete with you or your licensees.

It is also important to make sure the scope of the license itself makes sense. Apparel licensing transactions generally involve a right for a licensee to use your design to make and sell licensed products. Make sure you clearly spell out what specific products you want the licensee to make using your trademark. For example, you may only want your design to be used with t-shirts and not with polo shirts. This will need to be spelled out or the licensee can use your design on any apparel (or possibly other products), potentially affecting your brand.

In addition, ensure the license agreement gives you approval rights over all licensed products before the licensee can commercialize them. Unless you have a strict approval right over the licensed products, you could find that the licensed products will not meet your quality standards and may harm your brand.

The license agreement should also spell out how you get paid and on what basis. The licensee should pay you each time he/she makes and sells a licensed product. The payment could be a flat rate or a royalty based on the sale amount and your license agreement should use clear examples to explain how the payment works, what it is calculated on, and when it needs to be paid, and, in international deals, in what currency. Ambiguous payment terms or definitions of key terms have been at the root of many costly disputes. Also, to easily terminate an underperforming licensee, your agreement should set clear minimum sales targets and minimum guarantied royalties for the licensee to meet or exceed.

Having an appropriate license agreement can be critical to your success, so please discuss these issues, as well as many others, with your legal counsel when embarking on a licensing deal.