In Part 1 of this article, we examined how Proposition 65 settlement agreements are typically structured and which parties -- upstream suppliers and downstream distributors -- are included or excluded from liability releases. We discussed the growing enforcement landscape, real-world examples from 2025, and six strategic approaches to broaden settlement protections across the supply chain. ("Prop 65 settlement strategies: Which parties to include in your settlement agreements," Pejman Javaheri, Daily Journal, July 25.)
But one key party often overlooked in Prop 65 settlements is the
licensor -- the brand owner whose name appears on the product. In today's
market, where products are frequently manufactured, distributed, or sold under
a license, licensors face real and direct exposure to Prop 65 liability.
Part 2 of this article focuses on a critical question: Are you ensuring that the licensor is fully protected in your Prop 65 settlement? From explicit release language to third-party beneficiary clauses and amended Notices of Violation, this section explores practical tools and legal strategies to ensure licensors are not left vulnerable. Whether you're the licensee, the licensor, or counsel to either party, careful planning and coordination are essential to mitigate long-term legal risk and preserve the integrity of the licensing relationship.
When a product is manufactured, distributed, or sold under a license -- such as a branded apparel item, toy, or consumer good -- the licensor (the owner of the brand or intellectual property) faces potential Proposition 65 liability alongside the licensee. Including the licensor in the settlement is both possible and advisable, but it requires careful planning and negotiation.
When negotiating a Proposition 65 settlement for a licensed product, have you ensured that the licensor -- the owner of the brand or intellectual property -- is fully covered and released from liability? This crucial consideration is often overlooked, yet licensors can face direct Prop 65 risk simply by virtue of their brand appearing on a product. Failing to address the licensor's protection in your settlement agreement can leave a key stakeholder exposed to future claims.
To effectively protect the licensor, several strategies can be employed. The most straightforward is to explicitly name the licensor in the settlement's release provisions. This can be done by directly listing the licensor by name or by defining a category such as "licensors of the product," ensuring the release language is broad enough to cover all relevant entities. In some cases, the licensor is brought in as a formal party to the settlement agreement, signing alongside the licensee. This approach provides the strongest legal protection, but requires coordination and agreement on defense strategy, indemnity, and the terms of settlement.
Another practical solution is the use of third-party beneficiary clauses. If the licensor is not a formal party to the agreement, the settlement can state that the licensor is an intended third-party beneficiary of the release. This gives the licensor enforceable rights under the settlement, even if they are not directly involved in the negotiations.
If the original Notice of Violation did not name the licensor, the parties can work with the plaintiff to amend the notice, formally adding the licensor to the record. Plaintiffs are often open to this, especially if it results in a modest increase in the settlement amount or expedites resolution.
Contractual safeguards are also important. Well-drafted license agreements should require the licensee to defend and indemnify the licensor for Prop. 65 claims, and to seek the licensor's inclusion in any settlement releases. This advance planning streamlines the response to any enforcement action and reduces the risk of the licensor being left unprotected.
Throughout this process, early and open communication between licensee and licensor is critical. Immediate notification upon receipt of a Prop. 65 notice allows both parties to coordinate their defense and settlement strategy. Plaintiffs, for their part, are generally willing to include licensors in releases if it increases the overall settlement value or brings the matter to a quicker close.
Ultimately, the goal is to ensure that the licensor is not left exposed to future claims simply because of their association with a licensed product. By proactively addressing licensor coverage -- through explicit release language, party status, third-party beneficiary clauses, or amending the notice -- companies can achieve comprehensive legal protection and mitigate risk across the entire licensing relationship.
1. Explicitly name the licensor in the release
• Best practice: The settlement agreement should specifically define the licensor as a released party, either by name or by category (e.g., "licensors of the product").
• Sample release language: "...releases all claims relating to
the Covered Products...against [the licensee], its licensors, equity owners,
officers, employees, parent companies, corporate affiliates, subsidiaries,
predecessors, successors and assigns..."
2. Add the licensor as a party to the settlement:
• The licensor can be added as a formal party to the settlement agreement, signing alongside the licensee. This provides the strongest legal protection.
• This approach requires cooperation and coordination between the licensee and licensor, and may involve negotiation over indemnity, control of defense, and settlement terms.
3. Use third-party beneficiary clauses:
• If the licensor is not a formal party, the agreement can state that the licensor is an intended third-party beneficiary of the release. This gives the licensor enforceable rights under the settlement.
• Typical language: "The parties agree that [Licensor] is an
intended third-party beneficiary of this Agreement and shall have the right to
enforce the release provisions herein."
4. Amend the Notice of Violation (if licensor was not initially named):
• If the original Notice of Violation did not name the licensor, the plaintiff and defendant can agree to amend the notice to add the licensor, allowing for a formal release. Plaintiffs may request a modest increase in the settlement amount to cover the licensor, but this is often a cost-effective way to secure comprehensive protection.
5. Coordinate license agreements and indemnity:
• License agreements typically require the licensee to defend and indemnify the licensor for Prop 65 claims, and to seek the licensor's inclusion in any settlement releases. Proactive contract drafting can streamline settlement negotiations and reduce the risk of the licensor being left exposed.