In May 2018, Nestlé and Starbucks entered into a $7.15 billion coffee licensing agreement. Nestlé (the licensee) has agreed to pay $7.15 billion in cash to Starbucks (the licensee) for exclusive rights to sell Starbucks products (single serving coffee, teas, beans, etc.) through Nestlé`s worldwide distribution network. In addition, Starbucks receives royalties from coffees and packaged teas sold by Nestlé. A license for patent rights held by Harvard is subject to conditions similar to those provided in the form agreements in the links below. Some concepts can be changed to take into account the clear aspects of each situation. In particular, financial conditions are established on the basis of the technology granted, the licensee`s business model and the market standards in the sector in which the taker operates. The licensing agreement allowed Starbucks to promote brand awareness outside of its North American operations through Nestlé`s distribution networks. For Nestlé, the company has accessed Starbucks products and a strong brand image. The value of the brand can be positive or. Understand taxes. The royalties paid by the taker are recorded as commercial expenses. Royalties must be charged as revenue to the licensee and reported on Form 1099-MISC. Ask your tax expert about the tax impact of royalties.
As this simplification suggests, licensing is a symbiotic relationship between companies that, in a sense, do not correspond to intellectual property. Companies with intellectual assets that are more valuable than their current marketing structure can support the search for external partners to maximize returns on their assets. For example, a licensee of a known brand must not have the ability to manufacture and distribute all products that could be marketed under the brand name. In addition, it is not in the strategic interest of the company to participate in different types of production when these activities are not within its jurisdiction.