How to License Technology
Engaging in foreign trade requires joint ventures and technology licensing. It is advantageous for business whether small or medium.
That is why if you are interested to invest in foreign trade you should learn about technology licensing.
Technology licensing is an arrangement between parties negotiating about the compensation of the licensor and the licensee. The arrangement involves the licensor’s patents, service marks, trademarks, trade secrets and copyrights. The compensation can be in the form of royalties or lump sum royalty or combination of the two. Likewise, technology licensing is commonly used by most companies in the United States in such a way that the companies can have the opportunity sell and manufacture products in other group of countries mentioned in the licensing agreement.
Advantages of Technology Licensing
A company that has technology licensing agreement can have the chance to get into the foreign market easily. Likewise, the agreement also reduces the legal and financial risks as compared to participating in overseas joint business or operating foreign facility. In this sense, this method is attractive for companies that do not have experience in international trading. In addition, licensing can be used in acquiring foreign technology like cross-licensing agreements that can help improving the technology created by a licensee. On the other hand, technology licensing is not confined in the manufacturing sector alone but also in the franchising sector. Technology licensing in franchising, the franchisee is allowed by the franchisor to use its service mark or trademark when marketing goods and services. The good thing about this method is that the franchisor is continuously supporting the franchisee’s business operation by providing accounting, advertising, training as well as other related services.
Nevertheless, technology licensing has some setbacks in terms of exporting. This is due to the weakening of technology affected by the transfer to unaffiliated firm. Also, lesser profits are produced inn licensing as compared to actual exporting of products and services. It is also important to note that the agreement can be used in manufacturing products to compete with other licensor and licensees. Imposing of territorial restrictions could also be possible along with antitrust laws and licensing laws.
Indeed, technology licensing offers potential complexity. That is why before a company gets into the agreement it is ideal to seek for legal advice. It is also important to research about the prospective licensee as well as its country. The host country should approve the technology licensing agreement before it becomes effective. In some cases, government disallows royalty payments as well as contractual provisions that hinder exporting of products manufactured by the licensee through the licensed technology. In like manner, it is also necessary that prospective licensor should consider the host country. There are some factors that should be considered about the host country that include product liability laws, exchange controls, foreign patent, copyright laws, trademarks and other details.
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