Strategic Licensing Agreement

Where possible, parties should try to acquire a non-exclusive licence. This offers benefits to both the licensee and the licensee. First, the risk to both parties is less; the licensee does not depend on the success of a product and the reduction of the licence fee reduces the risk to the licensee. In addition, the licensee retains greater control over the product. In addition, reduced royalties reduce product costs, which can increase market share. Finally, licensing multiple companies increases the likelihood of improvements to the technology; These improvements can benefit the licensee and all licensees. Because of the legal basis they have to cover, some licensing agreements are quite lengthy and documents complex. But most of these agreements cover the same fundamentals. These include the scope of the agreement, including restrictions on exclusivity or territories; financial aspects, such as necessary advances, royalties and royalty calculations; Guarantees for minimum sales Calendars with “on-the-market” dates, contract duration and renewal options; the lessor`s rights to quality monitoring and control, including procedures to follow; Minimum inventories that need to be maintained and returns and allowances. 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. DuPont`s William Cotreau refines the question of identifying an internal champion. If the technology is more pie-in-the-sky (z.B. earlier, technical people have more arguments than if the technology is ready to be reduced to practice. In the latter scenario, businessmen will have more influence because the licensing of the technology will affect their operating budgets. Licensees often place more emphasis on technology when their competitors are deprived of it. While it is generally advisable to develop approach points, there are some risks in applying this sequencing strategy in the licensing world. Trying to attract an impulsive reaction from a large organization with its complex approval process is more likely to backfire than to yield results. When an assignee says that other large companies are interested, the solicited company may say that such an interest is irrelevant and that it has its own independent metrics and methods for determining the technologies and royalties that are appropriate for them.