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Granting a licence to manufacture products

An exporter who has researched and developed a new product may lack the resources to get it to international markets. One option is to sign a licence agreement that gives someone else the right to manufacture and market the product in a defined territory.

Licence agreements are difficult to negotiate and often become unstuck. It is hard to determine the value of technology and intellectual property - sellers fear undercharging while buyers fear paying too much.

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Many exporters overestimate the returns from licence agreements and underestimate the work and commitment involved. Experience shows that licence agreements that survive the first two years tend to last a long time so it makes sense to invest time and money in getting the relationship off to a good start.

Issues to consider when preparing a licence agreement include:

Products – include a detailed description

Territory – are sales limited to a specific area?

Exclusivity – can other licensees produce the products too?

Obligations – of the licensor and the licensee

Payments and Terms

Term of Agreement

Patents and Use of Trademarks

Technology Transfer – specify what the licensor will provide including support, training and quality control

Competition – can the licensee handle competitive product lines?

Confidentiality and IP Protection

Plant Access