Drafting a License Agreement
When it comes to protecting your intellectual property, having a license agreement in place is essential. A license agreement is a legally binding contractual document setting out the rights and obligations of both licensor and licensee. It ensures that the licensor’s intellectual property is protected from unauthorised use, and that the licensee has the right to use it in accordance with the terms of the agreement.
The advantages of having a license agreement are numerous. Firstly, it provides protection for both parties involved; enabling the licensor to control usage of their intellectual property, as well as safeguarding licensee against potential legal action should they breach any conditions or restrictions set out in the license. Secondly, it ensures that proper compensation for use of their IP is paid to the licensor - this can be an upfront fee or periodic payments dependent on terms outlined by both parties. Lastly, a license agreement allows flexibility; being able to be amended if necessary in order for either party’s requirements to be met.
At Genie AI we understand how important it is to have a clear understanding between all parties when using someone else’s IP; which is why we provide free access to our template library containing millions of datapoints on what makes up market-standard license agreements. Through this library anyone can draft and customize high quality legal documents without needing expert assistance - saving time and money without compromising quality or accuracy.
In summary, if you’re looking for protection for your own intellectual property or require licensing rights for another’s IP, then setting up a license agreement is key - with Genie AI providing an accessible solution through our community template library today! Read on below for more step-by-step guidance and information on how you can access these templates!
Definitions
Indemnification: A legal process where one party takes responsibility for any losses or damages caused by another party.
Terms and Conditions: Rules and regulations that must be followed in order to complete an agreement.
Disclosures: Information that must be made available to all parties involved in the agreement.
Warranties: A guarantee that certain conditions will be met in order to fulfill the agreement.
Royalty: A payment made to the owner of a copyrighted work for each use of the work.
Intellectual Property: Creative works protected by copyright or trademark law.
Duration: The length of time an agreement is in effect.
Termination: The ending of an agreement before the specified duration.
Dispute Resolution: A process for resolving disputes between parties in an agreement.
Contents
- Overview of the purpose and scope of the agreement
- Identification of the parties involved in the agreement and the scope of their obligations
- Identification of all parties
- Outline of individual obligations
- Definition of any applicable terms and conditions
- Specific definitions of any key terms
- Outline of any applicable limitations or restrictions
- Discussion of applicable laws and regulations
- Identification of any federal, state, or local laws that may apply
- Discussion of any relevant industry standards
- Identification of any required disclosures or notices
- Identification of any required disclosure statements
- Specification of the manner in which notices must be provided
- Specification of any indemnification clause
- Outline of the scope of the indemnification
- Details of any limitations or exclusions to the indemnification
- Specification of any warranties
- Outline of any applicable warranties
- Details of any limitations or exclusions to the warranties
- Identification of any applicable royalty or fee structure
- Details of any payable fees or royalties
- Identification of any applicable payment terms
- Discussion of any applicable intellectual property rights
- Identification of any applicable intellectual property rights
- Discussion of any relevant licenses or permissions
- Identification of any applicable duration or termination clauses
- Specification of any specific duration
- Identification of any grounds for termination or renewal
- Discussion of any applicable dispute resolution or arbitration clauses
- Outline of any applicable dispute resolution or arbitration clauses
- Identification of any laws or regulations that may apply
- Conclusion and signature section
- Outline of the parties’ intent for entering into the agreement
- Specification of the required signatures and witness information
Get started
Overview of the purpose and scope of the agreement
- Identify the purpose of the license agreement, such as granting a license to use intellectual property, providing access to a service, or granting permission to use software
- Describe the scope of the license agreement, including any restrictions on the licensee’s use of the intellectual property or software
- Specify any other important terms related to the license, such as payment terms, renewal provisions, and termination rights
- Check that the overview of the purpose and scope of the agreement is clear and complete
- When you have clearly outlined the purpose and scope of the agreement, you can move on to the next step
Identification of the parties involved in the agreement and the scope of their obligations
- Identify all parties involved in the agreement and specify their roles and obligations
- Make sure to include contact information for all parties
- List out the scope of each party’s obligations
- Make sure all parties understand their obligations and the scope of their role
- When you’ve listed out all parties and their obligations, you can move on to the next step.
Identification of all parties
- List out the names and contact information of all parties involved in the Agreement
- Know that you can move on to the next step when all parties involved have been identified and listed in the Agreement.
Outline of individual obligations
- List out the individual obligations of each party to the agreement, such as payment obligations and timeframes
- State any restrictions or limitations on the parties’ use of the rights and/or performance of the obligations
- Make sure to include which party bears the responsibility for any expenses or costs related to the agreement
- Once the obligations are all outlined, you can check this step off your list and move on to the next step.
Definition of any applicable terms and conditions
- Define the scope of the license agreement and any applicable terms and conditions
- Establish the duration, liability, and any other clauses that may be necessary
- Include any additional terms, such as warranties and representations, and any governing laws
- Make sure all terms are clear and unambiguous
- Once all terms and conditions are defined, the license agreement is ready to be finalized
Once all terms and conditions are defined, you can check this off your list and move on to the next step.
Specific definitions of any key terms
- Read through the agreement to identify any words or phrases that need to be defined for clarity
- Look up the definitions of these words and phrases in relevant legal dictionaries and reference works, and add them to the agreement
- Make sure the definitions are clear and unambiguous, and that they are consistent with the context in which they are used
- Have a qualified legal professional review the definitions to ensure accuracy and completeness
- Once the definitions have been reviewed and finalized, they should be added to the agreement, along with any relevant citations or sources
- Check off this step in your list and move on to the next step of outlining any applicable limitations or restrictions.
Outline of any applicable limitations or restrictions
- Review any previously drafted agreements for similar transactions to double-check for any applicable limitations or restrictions
- Identify any applicable laws or regulations that could limit or restrict the parties’ rights and obligations under the agreement
- Consider any industry-specific regulations that could apply, such as those governing certain types of professional services
- Include provisions to address any potential conflicts that may arise out of the parties’ relationship
- Include language to address any potential third-party claims or disputes
You’ll know when you can check this step off your list and move on when you have identified any applicable limitations or restrictions, as well as any necessary provisions to address any conflicts that may arise.
Discussion of applicable laws and regulations
- Research any relevant laws and regulations that may apply, such as intellectual property law, contract law, employment law, etc.
- Review the agreement to determine if any of the applicable laws are being violated.
- Identify any potential areas of conflict and determine how they can be addressed.
- Create a list of all applicable laws and regulations and make sure they are addressed in the language of the agreement.
Once the necessary research is complete and any conflicts are addressed, this step is complete and you can move on to the next step.
Identification of any federal, state, or local laws that may apply
- Research the applicable federal, state and local laws that may apply to the license agreement.
- Consider the licensing requirements for any copyrighted material and any applicable trademark, patent or trade secret laws.
- Also consider any relevant consumer or labor protection laws or regulations.
- Once all relevant laws have been identified, move on to the next step.
Discussion of any relevant industry standards
- Research any industry standards that may be relevant to the license agreement, such as the American Intellectual Property Law Association’s Model Licensing Agreement.
- Consider any industry-wide practices that may be applicable, such as the common practice of allowing the licensor to use the licensee’s trademark.
- Determine if any standards or practices should be included in the license agreement.
- When you have identified any standards or practices that should be incorporated into the agreement, you can check this step off your list and move on to the next step.
Identification of any required disclosures or notices
- Identify the laws, regulations, and industry standards that apply to the parties to the license agreement
- Determine whether any specific disclosures or notices are required by applicable law or industry standards, such as disclosures related to privacy, data protection, or GDPR compliance
- Identify any additional disclosures or notices that the parties may wish to include in the license agreement
- Draft the applicable disclosures and notices in accordance with the applicable laws, regulations, and industry standards
- Incorporate the disclosures and notices into the license agreement
- Once all of the required disclosures and notices have been identified and incorporated into the license agreement, you can move on to the next step.
Identification of any required disclosure statements
- Research the applicable laws or guidelines that require disclosure statements related to the license agreement
- Identify any required disclosure statements and list them out
- Check off this step once all required disclosure statements have been identified and listed out
- Move on to the next step, which is specifying the manner in which notices must be provided
Specification of the manner in which notices must be provided
- Identify the method of communication that must be used when providing notices under the agreement (e.g., email, registered mail, etc.)
- Specify the address to which notices must be sent
- Determine whether notices will be considered effective upon receipt or upon actual delivery
- Determine how long a party has to respond to a notice before it is considered to be received
- Consider adding a clause that requires notice of any change of address
- Specify the language to be used in notices
- Determine whether any additional steps are required when providing notices (e.g., filing a copy of the notice in a certain location)
Once you have identified the method of communication that must be used, specified the address to which notices must be sent, determined when notices will be considered effective, and specified the language to be used in notices, you can check this step off your list and move on to the next step.
Specification of any indemnification clause
- Specify the obligations of each party regarding indemnification for any loss, damages, or other liabilities resulting from a breach of contract.
- Decide who is responsible for indemnifying whom and to what extent.
- Detail the scope of the indemnification including any exclusions.
- Identify the circumstances that trigger the indemnification clause.
- Include a limitation of liability clause.
- Outline the procedure for how a party can seek indemnification.
Once you’ve completed these steps, you can check off this step and move on to outlining the scope of the indemnification in the next step.
Outline of the scope of the indemnification
- Determine the scope of the indemnification clause, including which parties are indemnified and the types of losses that are covered.
- If a party is required to indemnify another, include language that specifies the scope of the liability.
- Draft language to ensure that the indemnified party is not held responsible for certain specified losses.
- Outline any specific exclusions or limitations to the indemnification clause.
- When complete, review the clause to ensure it accurately reflects the scope of indemnification.
- Once the clause is reviewed and finalized, you can move on to the next step in drafting the license agreement.
Details of any limitations or exclusions to the indemnification
- Draft a clause that clarifies the conditions under which the indemnification will be valid
- Set out any limitations or exclusions that may apply, such as specific exceptions that are not subject to the indemnification
- Ensure that the clause is clear and specific, and that it accurately reflects the agreement between the parties
- Once you have drafted the clause that outlines the details of any limitations or exclusions to the indemnification, review it to make sure it is accurate and complete.
- Once you are happy with the clause, you can move on to the next step.
Specification of any warranties
- Identify what warranties are necessary to ensure protection of the parties
- Include warranty against infringement of third party rights
- Define the scope of the warranties
- Determine the length of warranties
- Outline the remedies available to parties if warranties are breached
- Check that warranties are legally enforceable
- Once all warranties have been specified, review the license agreement to ensure compliance with applicable laws and regulations
- When all the above steps are completed, move on to the next step of outlining any applicable warranties.
Outline of any applicable warranties
- Identify the scope of the warranties that will be included
- List any general warranties that will apply
- Determine any additional warranties that will be included
- Outline any limitations or exclusions of the warranties
- Check to make sure any warranties meet applicable legal requirements
- Confirm that all warranties have been outlined in the agreement
Once you have identified the scope of the warranties, listed any general warranties, determined any additional warranties, outlined any limitations or exclusions of the warranties, checked to make sure any warranties meet applicable legal requirements, and confirmed that all warranties have been outlined in the agreement, you can move on to the next step.
Details of any limitations or exclusions to the warranties
- Identify any statutory or other implied warranties that may be excluded
- Research any applicable state laws or regulations that may apply
- Determine if there are any limits on the amount of damages that may be recovered
- Specify any limitations to the types of products or services that are covered under the warranties
- Consider any limitations on the duration of the warranties
- Draft language that excludes and/or limits any warranties
Once you have identified, researched, determined, specified and considered any limitations or exclusions to the warranties and drafted the language to include them, then you can check this off your list and move on to the next step.
Identification of any applicable royalty or fee structure
- Research applicable royalty or fee structures for the license agreement.
- Understand the different types of royalty and fee structures that may be applicable to the license agreement.
- Consider the purpose of the license agreement and the type of license agreement being drafted when determining which royalty or fee structure is appropriate.
- Draft the applicable royalty or fee structure into the license agreement.
- Check for any errors or inconsistencies in the royalty or fee structure within the license agreement.
- Ensure that the royalty or fee structure within the license agreement is compliant with all applicable laws.
- When these tasks have been completed, the step of “Identification of any applicable royalty or fee structure” has been completed and you can move on to the next step of “Details of any payable fees or royalties.”
Details of any payable fees or royalties
- Determine the amount/rate of any applicable fees and royalties
- Specify the payment schedule for the fees and royalties
- Identify any penalties for late payment
- Specify the currency in which the fees and royalties should be paid
- Include any additional payment requirements
Once you have gathered all the information and determined the applicable fees and royalties, you can include all of the necessary details in the license agreement. This step can be checked off the list and you can move on to the next step.
Identification of any applicable payment terms
- Determine the payment terms that will be included in the license agreement
- Establish the payment deadline, payment amounts and payment method
- Specify the currency in which payments will be made
- Include any late payment fees, interest or other penalty charges
- Once all payment terms have been identified, documented and agreed upon, the step is complete and you can move on to discussing any applicable intellectual property rights.
Discussion of any applicable intellectual property rights
- Determine which party will own the intellectual property rights associated with the agreement.
- Consider which party will have the right to use the intellectual property rights associated with the agreement.
- Address any applicable restrictions on the use of the intellectual property rights.
- Draft the necessary contractual language to address the intellectual property rights.
Once the necessary contractual language has been drafted, you can check this step off your list and move on to the next step, which is ““Identification of any applicable intellectual property rights””.
Identification of any applicable intellectual property rights
- Identify any intellectual property rights (IPRs) that are applicable to the license agreement.
- Make a list of the IPRs.
- For each IPR, note who owns it and the scope of the IPR.
- Make sure the IPRs are correctly identified and properly described.
- When complete, you should have a clear understanding of the applicable IPRs and who owns them.
Discussion of any relevant licenses or permissions
- Research existing licenses, such as Creative Commons, Apache, or GNU licenses, that may be applicable to the agreement
- Determine the scope of the license, such as whether it will be exclusive or nonexclusive
- Identify any other licenses that may be needed in addition to the one being negotiated
- Make sure any licenses are properly referenced in the agreement
- Confirm that the license is being granted to the correct party
- Once all relevant licenses and permissions have been identified, checked, and referenced in the agreement, you can move on to the next step.
Identification of any applicable duration or termination clauses
- Review the license agreement to determine whether any duration or termination clauses are applicable.
- Consider any other relevant laws or regulations that may apply to the agreement.
- Determine the duration of the agreement.
- Identify any termination clauses, if applicable.
- Draft the duration and termination clauses of the agreement, if any.
- Once the duration and termination clauses have been determined and drafted, you can move on to the next step.
Specification of any specific duration
- Determine the length of time for the license agreement and specify it in the agreement
- Consider whether the license agreement should be for a fixed or indefinite period and the consequences for each
- Define the start and end dates for the license agreement
- When you have specified the duration in the agreement, you can check this off your list and move on to the next step.
Identification of any grounds for termination or renewal
- Review the parties’ rights and obligations in the Agreement and determine whether any grounds for termination or renewal should be included.
- Consider grounds for termination including, but not limited to, breach of contract, default, or termination due to a change in law or circumstances.
- Consider grounds for renewal, including but not limited to, automatic renewal, renewal upon request, and renewal upon satisfaction of certain conditions.
- Draft any necessary provisions outlining the grounds for termination or renewal and include it in the Agreement.
- Once all necessary grounds for termination or renewal are included in the Agreement, this step is complete.
Discussion of any applicable dispute resolution or arbitration clauses
- Consider what kind of dispute resolution or arbitration clauses you need for the agreement.
- Research different dispute resolution and arbitration clauses to see which ones are most suitable for the agreement and what their legal implications are.
- Consult a lawyer to ensure that any clauses you decide to include are legally valid.
- Decide which dispute resolution or arbitration clauses you wish to include in the agreement.
- Include the clauses in the agreement and make sure to clearly define them.
Once you have discussed any applicable dispute resolution or arbitration clauses and included them in the agreement, you can move on to the next step in drafting the license agreement.
Outline of any applicable dispute resolution or arbitration clauses
- Review any existing dispute resolution or arbitration clauses in the license agreement
- Outline any necessary terms and conditions that should be included in the license agreement
- Ensure that the outlined clauses clearly define the process for resolving disputes and arbitrating any issues
- Ensure that the outlined clauses are in accordance with applicable laws and regulations
- Document the outlined clauses in the license agreement
- Once the clauses have been outlined and documented, check off this step and move on to the next step.
Identification of any laws or regulations that may apply
- Research any applicable national, state, and local laws and regulations that may apply to the license agreement
- Review and consider the laws and regulations that pertain to the license agreement and make sure these are included in the document
- If international or foreign laws and regulations are applicable, consult with a qualified attorney who is knowledgeable about the applicable laws and regulations
- When the applicable laws and regulations have been identified and included in the document, check off this step and move on to the next step in the guide.
Conclusion and signature section
- Draft a conclusion section that summarizes the agreement and which includes the effective date of the agreement
- Ensure that the conclusion section includes a severability clause in accordance with applicable law
- Include a signature section that includes a space for each party to sign and date the agreement
- Finalize the agreement by having each party sign and date the agreement
- Once the agreement is signed and dated, you can check this off your list and move on to the next step in the guide.
Outline of the parties’ intent for entering into the agreement
- Brainstorm the purpose for which the license agreement is being created
- Identify the roles and responsibilities of each party
- Outline the scope of the agreement, such as the duration, the scope of rights granted, and the scope of the license
- List down any limitations or restrictions placed on the licensee
- Determine the conditions necessary for the agreement to be valid
- Once all these points have been discussed and agreed upon by both parties, draft a brief summary of the agreement in the form of a clause
When complete, you should have a clear outline of the parties’ intent for entering into the agreement.
Specification of the required signatures and witness information
- Research and determine what type of signature is required for the agreement, such as a wet-ink signature or an electronic signature
- Identify the parties who will sign the agreement and provide their full names and titles
- If any witness signatures are required, identify the witness and provide their full name and title
- Verify any notary requirements and identify the notary requirements, such as the notary’s name, title, date, and location
- You can check this off your list and move on to the next step once you have identified all of the required signatures, witness information, and notary requirements for the agreement.
FAQ
Q: what is the difference between a license agreement and a service agreement?
Asked by Teresa on 12th June 2022.
A: A license agreement grants the licensee the right to use intellectual property or software owned by the licensor, such as an invention, patent, brand name, trade secret or copyrighted work. A service agreement, on the other hand, outlines the terms and conditions of a service provided by a service provider to a customer. The services typically provided under a service agreement include consulting services, IT services, labor services, training services, and other professional services.
Q: What are the typical clauses that should be included in a license agreement?
Asked by Brandon on 5th May 2022.
A: A standard license agreement should include clauses outlining the terms of the license, such as the duration of the license, any restrictions on use of the licensed material, any warranties or indemnification provisions, payment terms, governing law and jurisdiction provisions, confidentiality provisions, dispute resolution procedures and termination provisions. It is also important to include applicable intellectual property rights or copyright notices in the agreement.
Q: What are best practices for drafting a license agreement?
Asked by Michael on 3rd October 2022.
A: It is important to ensure that all parties understand their respective rights and obligations under the agreement. In order to do this effectively, it is best practice to include plain language definitions of key terms in the agreement and to state any restrictions or limitations that may apply in plain language. It is also important to ensure that all parties’ liability is limited in appropriate ways with respect to any warranties or indemnification clauses. Additionally, it may be beneficial to include dispute resolution procedures such as arbitration or mediation as well as termination provisions that allow for either party to terminate the agreement upon notice if certain conditions are met.
Q: What are some considerations when drafting a license agreement for software?
Asked by Alex on 8th April 2022.
A: When drafting a license agreement for software it is important to consider the applicable laws in your jurisdiction with respect to software licensing. Additionally, it is important to consider how you will protect your intellectual property rights with respect to the software being licensed. This could involve including restrictions on how the software can be used and distributed as well as warranties or indemnification clauses with respect to any potential infringements of your intellectual property rights. Additionally, you should consider any payment terms that may apply and include those in your agreement accordingly.
Q: How can I make sure my license agreement complies with EU law?
Asked by Emily on 28th August 2022.
A: To ensure your license agreement complies with EU law you should be aware of any applicable laws in your jurisdiction with respect to software licensing as well as any applicable EU regulations such as GDPR regulations that may apply to your particular business model (e.g., technology companies). Additionally, you should consider including specific clauses that address EU law compliance such as an audit clause which allows for independent auditors to review your systems for compliance with EU laws and regulations if necessary. Finally, you should consult with legal counsel who is familiar with EU law if necessary to ensure your agreements are compliant with all applicable laws and regulations.
Q: Are there different considerations when drafting a license agreement for SaaS versus traditional software?
Asked by Jennifer on 17th January 2022.
A: Yes, there are different considerations when drafting a license agreement for SaaS versus traditional software due to differences in usage models and potential liabilities associated with each type of software product. For example, when drafting a SaaS license agreement it may be necessary to include additional restrictions on usage beyond what would be necessary for traditional software due to additional security concerns associated with cloud-based software solutions. Additionally, SaaS agreements may need additional clauses addressing data processing activities and liabilities for data breaches or other security issues that could arise from using cloud-based solutions.
Q: How do I make sure my license agreement complies with US law?
Asked by Sarah on 14th December 2022.
A: To ensure your license agreement complies with US law you should first review any applicable US federal laws such as copyright laws and antitrust laws that may apply depending on your particular product or service offering. Additionally, you should research any state laws that may apply depending on where you will be offering services or selling products within the US (e.g., California has its own particular set of consumer protection laws). Additionally, you should consult legal counsel who is familiar with US law if necessary to ensure your agreements are compliant with all applicable laws and regulations within each jurisdiction where services are offered or products sold within the US.
Q: Are there different considerations when drafting a B2B versus B2C license agreements?
Asked by David on 4th July 2022.
A: Yes, there are different considerations when drafting B2B versus B2C license agreements due to differences in usage models and potential liabilities associated with each type of business model. For example, when drafting a B2B license agreement there may be additional provisions related to warranties or indemnification clauses that would not be necessary for B2C agreements due to greater potential liabilities associated with business-to-business relationships (e.g., liability for customers’ down-stream damages). Additionally, B2B agreements may need additional clauses addressing data processing activities and liabilities for data breaches or other security issues that could arise due to greater access by multiple businesses within each organization’s ecosystem (e.g., third party vendors).
Q: How should I structure payment terms in my license agreements?
Asked by Emma on 25th March 2022.
A: Payment terms in a license agreement should be structured in a way that protects both parties’ interests while also providing flexibility where possible (e.g., providing payment options such as monthly payments versus one-time payments). Additionally, it is important to include language regarding late payments (e.g., interest charges for late payments) and default payments (e.g., termination of the contract if payment is not received) in order to protect both parties’ interests if payments are not received timely or at all according to agreed upon terms within the contract itself. It is also important to ensure any payment methods allowed under the contract comply with applicable laws and regulations (e.g., PCI-DSS requirements if credit card payments are allowed).
Q: How do I make sure my license agreements comply with UK law?
Asked by Matthew on 18th November 2022.
A: To ensure your license agreements comply with UK law you should first review any applicable UK consumer protection laws such as the Consumer Rights Act 2015 which provides consumers certain rights when purchasing goods or services from businesses operating within the UK (e.g., right to reject faulty goods). Additionally you should research any sector specific regulations which may apply depending on your particular product or service offering (e.g., healthcare sector specific regulations). You should also consult legal counsel who is familiar with UK law if necessary to ensure your agreements are compliant with all applicable laws and regulations within each jurisdiction where services are offered or products sold within the UK .
Q: Are there special considerations when drafting an international license agreement?
Asked by John on 22nd February 2022
A: Yes there are special considerations when drafting an international licence agreement due its scope which could cover multiple jurisdictions across different countries which have their own particular set of laws and regulations pertaining to intellectual property rights and software licensing . When drafting an international licence agreement it is important consider which country’s laws will govern disputes related thereto , which countries will receive royalties from sales , what type of enforceability will exist across countries , what types of licenses will be granted , what types of warranties will exist , how payments terms will work across borders , how digital signatures can be used amongst other considerations . Additionally , it is important consult legal counsel who is familiar with international law if necessary .
Example dispute
Suing a Company for Breach of License Agreement
- The plaintiff must prove that a legally binding license agreement exists between the parties, and that the defendant has breached the terms of the agreement.
- The plaintiff must provide evidence to prove that the defendant violated the terms of the agreement, such as failing to adhere to certain deadlines, or not providing certain goods or services.
- The plaintiff may then seek monetary damages or an injunction to stop the defendant from continuing the breach of contract.
- The court may award damages for any losses or harm suffered due to the breach of contract, including compensatory damages, consequential damages, or punitive damages.
- The court may also grant an injunction, which is an order from the court requiring the defendant to perform certain duties or refrain from certain activities under the license agreement.
- The court may also award legal fees and costs to the plaintiff if the claim is successful.
Templates available (free to use)
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