Michigan Allows Uncapped Royalty Fees for Cannabis IP

The Michigan Licensing and Regulatory Authority issued a statement informing medical marijuana facilities they may enter into licensing agreements for another company’s intellectual property including brands or recipes. The license agreement may include a royalty fee for each unit sold. Michigan’s approach is a bit hands-off compared to other states that view license agreements as a side door approach to avoiding licensing requirements.  Washington State currently has a bill that would place a 10% cap on licensing fees to prevent this risk. Parties entering into the licensing agreement should consider the impact of a a subsequent change in Michigan law. As Michigan’s regulatory framework matures, it too could decide to cap royalty fees in order to retain tighter control over licensees.

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