Louis Mangione

Innovations in Education, Inc.

Foreign Licensing Agreement Meaning

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Licensing may not be the most cost-effective way to enter a foreign market, but it offers less risk than a time-sustaining and costly direct investment. On the other hand, a small company should be careful to protect the information it shares with a foreign company as part of its licensing strategy. Export.gov, a U.S. government department, recommends that all patents and trademarks be registered in each country where a small business does business to protect its interests. A foreign company could use the intellectual information a company provides to start producing its own products and become a competitor rather than a collaborator. Even if you feel safe in your choice of licensee, you may have to settle a dispute with them in the future. The licensing agreement should provide that the taker accepts U.S. jurisdiction, so you don`t have to deal with the case in a foreign country. (If a licensee is already doing important business in the United States, he may already be subject to U.S. jurisdiction, but you should not take that opportunity.) Licensing can also be done for the use of a trade name, for the distribution of imported products and for a service.

7-Eleven is considered the leader in licensing the convenience industry and signed its first licensing agreement in the United States in 1968. One of the most important elements of a licensing agreement is the financial agreement. Payments made by the licensee to the licensee are usually made in the form of guaranteed minimum payments and royalties for sales. Royalties are generally between 6 and 10 per cent, depending on the ownership and the degree of experience and sophistication of the licensee. Not all licensees need guarantees, although some experts recommend that licensees receive as much compensation in advance as possible. In some cases, licensees use warranties as the basis for renewing a licence agreement. If the taker completes the minimum sales figures, the contract is renewed; Otherwise, the licensee has the option of terminating this relationship. A well-developed licensing agreement defines each party`s obligations and provides a means to resolve disputes that arise. For example, you may need to obtain a copyright registration for your work in the countries where the licensee sells it. The agreement may provide that the taker will take over the copyright registration process, as he or she is in a better position to address the associated logistics.

An example of a licensing agreement in the restaurant industry would be that a McDonald`s franchisee has a licensing agreement with McDonald`s Corporation that allows them to use the company`s branded and marketing materials. And toy manufacturers regularly sign licensing agreements with movie studios and give them the legal authority to produce action characters based on popular similarities of movie characters. The effectiveness of a foreign licensing agreement often depends on the ability of the foreign company to meet the requirements of the agreement. Small businesses, which often do not have the resources to explore foreign companies on their own, can use the services of government agencies such as the International Trade Administration`s Strategic Partnership Program to help them find qualified partners in other countries. The agency`s goal is to help small businesses improve their ability to penetrate foreign markets by collaborating with trade and private associations around the world. Another important element of a licensing agreement defines the timing of the agreement. Many licensees insist on a strict marketing date for products that are granted to external manufacturers.

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