Foreign licensing agreements are an excellent method to develop the market for your intellectual property and profit from your creation. When you partner with foreign corporations with a business network already in place, all that is needed is your consent to market your product. Then you just have to sit back and wait for the royalties to begin flowing. However, because the rights awarded by a U.S. patent cover only U.S. territories, they have no effect in foreign countries. An inventor who needs patent protection in another country must file for a patent in each location or regional patent office. When you are prepared to sign a foreign licensing agreement, make sure to choose your business partners carefully, negotiate the critical terms of the contract, and watch the use and progress of the marketing of your product.
Conducting Due Diligence of Potential Foreign Partners
In any negotiation, the purpose is to minimize risk and maximize profits. You do this in a contract by including clauses that protect your rights, negotiating for advantageous terms, having the other party assume liability for acts outside your power, and other related actions. With foreign licensing agreements, always verify the competency of the company with which you are licensing. Make sure to get references and their history with licensing similar products. Any reputable licensing company should be prepared to furnish you with a list of clients and contact information.
Contract Terms to Include
After you have concluded that a potential foreign partner is reputable, you can move on to negotiating the terms of the licensing agreement. Both parties must abide by the contract, so you want to maintain your rights. In addition to the general contract terms, you will want to include terms relevant to agreements with foreign companies.
- Choice of law. Always insist that the laws of your state govern if disputes arise.
- Arbitration. Agree to appoint a neutral third party with experience dealing with such disputes in the industry.
- Jurisdiction. Explicitly assert that the licensing company agrees to the U.S. exercising jurisdiction over it.
- Advance on royalties. An advance on royalties may be appropriate, depending on your industry.
- Method of payment. Royalties should be made using a wire transfer.
- Accounting. The licensing company should submit semi-annual accounting records.
- Release of obligation. Include language that allows you to release a poorly performing company from licensing your product.
- Termination. Designate a specific term after which the contract will expire.
Avoid any wording that can be interpreted as too general or referring to times of the year without specifying the exact date or month. It is essential to remove any commonly used expressions that can appear unclear or vague in your trademark policy. Any legal and binding agreement should be closely assessed at the strategic level, depending on the goals and objectives of a business, before you sign the paperwork.
Protecting Intellectual Property Rights Overseas
Many small businesses experience problems trying to protect their IPR abroad, particularly in China, as they are unaware of the measures available for securing and enforcing their intellectual property rights in foreign countries. Some fundamental, low-cost actions small companies should consider include the following:
- Conducting due diligence of potential foreign partners
- Developing detailed IPR wording for subcontracting and licensing agreements
- Cooperating with legal counsel to produce a comprehensive IPR protection strategy
- Reporting U.S.-registered copyrights and trademarks to the Customs and Border Protection Agency
- Obtaining and filing copyrights, trademarks, and patents in essential foreign markets, including proactively in areas where IPR violations are prevalent
Almost every country has a unique patent law, and an inventor seeking a patent in a particular country must submit an application for a patent in that country, in accordance with the provisions of the law. Similarly, local regulations apply to copyrights, trademarks, and other methods of intellectual property in each jurisdiction.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.