Independence of Licensees

A few times we already pointed out, that as a licensor you have some responsibility for your licensees. Yes, they are independent companies and that is one of the advantages of licensing over for example franchising.

But, they are not totally independent. The smaller the company and the more important your brand license to their business, the higher your responsibility. That might not always be a legal responsibility, sometimes it is a moral one. To give you an example, when Tommy Hilfiger pulled its shirt license from its licensee Einhorn, those lost 70% of their revenues. And since Einhorn could not replace the license, it went bust.

Now in some cases the responsibility goes even further.
In a recent case the highest appelate court in Germany for civil and criminal cases decided, that in general a terminated licensee is entitled to compensation similar to a terminated exclusive sales agent. This is more likely, if the licensee has to hand over client lists and if the licensor continues selling in that product category.

You might want to check your brand license contracts regarding this matter.