Licensing is a contractual agreement in which the company, the licensee, offers property for royalties to a foreign company, the licensee. Suppose you are not able to export to an overseas market because of complex rules and regulations or because transportation costs are prohibitive. This is where the license works. You give to a foreign company to manufacture your product and sell it in that market for a fee. A small business that wants to expand into foreign markets often faces financial and cultural barriers that can hinder the success of expansion. Foreign licensing agreements can help a small company expand its product lines to other countries if it is unable to build and manage production-based production sites established abroad. These agreements offer considerable benefits to a small business and can allow it to make money from its ideas and products on the international market, while reducing the financial risk of expansion if the company tries it itself. Those who enter into a licensing agreement should consult a lawyer, as there are complexities that are difficult for those who do not have a deep understanding of intellectual property law. 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.
Finally, it is not in the licensee`s interest to license a company that never markets the product. The licensing agreement also contains provisions relating to the duration of the contract, renewal options and termination terms. In a typical licensing agreement, the licensee undertakes to make intellectual property rights such as technology, brand name or licensee know-how available to the licensee. In exchange for the intellectual property of the licensee, the purchaser usually plays the donor a pre-feeding and/or a licence fee. A licence fee is an ongoing fee paid for the licensee`s right to use intellectual property. 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.