Define Foreign Licensing Agreement
The bargaining power of both parties to a licensing agreement often depends on the nature of the product. For example, a film studio that would grant the image of a popular superhero to an action figure maker could have considerable bargaining power in this negotiation, as the manufacturer will likely benefit from such an agreement. The film studio therefore has the lever to take its business elsewhere if the manufacturer has cold feet. The licensing agreement is a complex legal document beginning with the identification of contractors and the dates of the contract. It defines the object subject to license, including patents and trade secrets. The provisions or rights of the licence are also specified, for example. B if it grants exclusive rights or is subject to other agreements. Possible restrictions, such as . B territorial and quantitative restrictions will also be fixed. A final section may indicate the duration, termination and related provisions of the agreement. 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. Licensing is a great way to enter a new foreign market.
Here`s a look at what licensing is and what the benefits of licensing are. 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. In the broadest sense of the word, licensing is an important type of entry for companies considering international expansion. A licensing agreement gives a foreign company the right to manufacture and/or sell products from another company in its country. The agreement may also include production and sale in more than one country. The taker takes the risk and invests in product production handling facilities and management facilities for other members of the supply chain in order to deliver the product and even sell it to the end consumer. The licensee usually receives a fee for each unit produced and sold. Because the licensee has little investment, this method is seen as an easier way to become an international or global company. After a few years of importing this way, he learned that the product has 90 percent water with a secret formula that does the rest.
And now he found out that he spends thousands of dollars a year importing water. At that point, he asked us to license the product for manufacture in Sweden, and that is what we did. We delivered 55-gallon drums, gave instructions on how to make the product – he also had to sign a confidentiality agreement – and then our client ended up making batches for completion. Licensing has certain risks and disadvantages. The company may lose control of the production and marketing of its products in other countries. As a means of entering the international market, licensing may also be less cost-effective than other decisions, since returns must be distributed between two parties. There is even a risk that the foreign licensee may sell a competing product similar to the expiry of the license agreement. Other risks and problems are the choice of a partner and all general uncertainties in the business with an international partner, including language, culture, political risk and currency fluctuations. Alternatives to licensing are exporting, acquisitions, the creation of a 100% international subsidiary, franchising and the formation of strategic alliances. 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