CoolBrands International has entered into an agreement with Binney & Smith to create a line of frozen novelties based on the Crayola brand, including pops, bars, sandwiches, cups, cones, sundaes, and shakes. CoolBrands will pay Binney & Smith a royalty for the right to use the Crayola trademark. What kind of business agreement is it? Is it a limited partnership, joint venture, or cooperative agreement?
The Correct Answer and Explanation is:
The correct answer is: Licensing agreement, which is not listed among the options provided (limited partnership, joint venture, cooperative agreement). However, from the given options, the closest and most appropriate choice based on the description is: none of the above — but if forced to choose, a cooperative agreement might be the least incorrect, although it’s still not technically accurate.
Explanation
The agreement between CoolBrands International and Binney & Smith (the makers of Crayola) is best classified as a licensing agreement. In this arrangement, Binney & Smith licenses the use of the Crayola trademark to CoolBrands for use on a line of frozen novelty products. CoolBrands will pay a royalty to Binney & Smith for the rights to use this brand name. This setup clearly demonstrates a licensor-licensee relationship rather than a partnership or joint venture.
A licensing agreement allows one company (the licensee) to use another company’s intellectual property (such as a brand name, logo, or technology) in exchange for fees or royalties. The licensor (Binney & Smith) retains ownership of the trademark, while the licensee (CoolBrands) gains the right to use it under specific conditions.
This is not a limited partnership, because that would involve two or more parties investing together in a business with at least one general partner managing the venture and one or more limited partners with limited liability. There’s no indication that both companies are jointly managing a single business.
It is also not a joint venture, which would involve the two companies co-owning and jointly operating a new business entity, sharing profits, losses, and control. In this case, there’s no shared ownership or new entity formed.
Lastly, it is not a cooperative agreement, which usually refers to arrangements among businesses or individuals working together voluntarily for mutual benefit, often in non-commercial or non-profit contexts.
Therefore, the agreement described is a licensing agreement, a common way for companies to expand their product offerings through brand collaborations without forming deeper business alliances.
