WHAT IS 'Licensee'

Licensee describes any business, organization or individual that has been granted legal permission by another entity to engage in an activity. The permission, or license, can be given on an express or implied basis.

BREAKING DOWN 'Licensee'

A licensee has received legal permission from another party to conduct some sort of business over which that other party holds some authority. Many variations on this relationship exist in the business world. Some common examples include:

  • Franchises. Under a franchise agreement, the franchisee is granted permission to use the franchiser’s assets, such as supply chain, trademarks or other intellectual property for a certain period of time. Typically, the franchisee is granted exclusive rights to those assets within a certain localized area.

  • Brand licensing. The licensee is permitted to use a licensor’s trademarks and logos on their own manufactured products, such a sports apparel.

  • Government license. This is a mechanism for local governments to oversee, and in many cases tax, business operators. A liquor license is an example. By issuing the license, a city or county ensures compliance with regulation and receives an additional revenue stream specifically associated with the sale of alcohol. A license to sell securities is a similar permission granted on a nationwide basis.

  • Implied license. This can be a more ambiguous relationship, legally, as there is no express permission granted. The classic example is the implied permission granted to a firefighter to enter a burning building whose owner is not present to formally approve entry. In business, this concept tends to involve a licensee interpreting communications with a licensor as implied permission to make use of an asset.

Real Estate Use and Licensees

An important use of licensee refers to permissions granted to access real estate. Typically, a licensee of property has been granted express permission to make use of land by the owner. The property in question is not open to the general public.  A common example used in law schools is the hunter with written permission to hunt on a landowner’s property. Without the permission, the hunter would be considered a trespasser and under very little legal protection from hazards encountered while hunting there. Nor is the hunter an invitee, a legal term to describe a guest with recourse to take legal action in response to damages suffered while in the property.

Licensee Obligations

In addition to any fees associated with the licenses listed above, licensees are often subject to requirements that they treat the granted permission responsibly. The hunter is expected to leave the property in the condition they found it. The securities broker is required to recommend investments appropriate to the client. The liquor store operator is prohibited from selling to underage or intoxicated customers. A license does not grant free reign to exploit the licensed rights, whether they be to a public or private asset.

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