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In order to be successful, a licensing agreement should mutually benefit both parties. There are obviously many reasons why the parties may want to license. One of the benefits to the licensor may be maximizing income by expanding market opportunities without large capital expenses. A benefit to the licensee may include rapid entry into a market using technology developed and tested by others. Whatever the advantages are, the license agreement should be structured so as to maximize the benefits to each party. In order to do so, the compensation paid by the licensee to the licensor must be fair to both sides to have a really successful long term licensing arrangement. While the licensor wants to maximize income from the license, the licensor must balance that need with making sure the licensee makes an adequate profit after payment of the license fees, to give incentive to the licensee to maximize the market.

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