Licensing of
industrial property rights is one of the legal measures to transfer technology.
In accordance with Law on Intellectual Property, licensing of an industrial
property rights means permission by the owner of such industrial property
object for another organization or individual to use the industrial property
object within the scope of the owner’s right.
Licensing of industrial property
rights must be established in the form of a written contract.
There are three types of industrial property object licence contracts:
Exclusive contract; Non-exclusive contract; Industrial property object
sub-licence contract.
Exclusive contract means
a contract under which, within the licensing scope and term, the licensee shall
have the exclusive right to use the licensed industrial property object while
the licensor may not enter into any industrial property object licence contract
with any third party and may use such industrial property object only with
permission from the licensee.
Non-exclusive contract
means a contract under which, within the licensing scope and term, the licensor
shall still have the right to use the industrial property object and to enter
into a non-exclusive industrial property object licence contract with others.
Industrial property
object sub-licence contract means a contract under which the licensor is a
licensee of the right to use such industrial property object pursuant to
another contract.
What is the advantages
and the disadvantages of licensing contract?
Firstly, for licensor,
licensing can be used to access new markets that are not easily accessible. By
allowing the licensee the right to market and distribute the products, the licensor
can more easily enter the market; Licensing contract may stipulate measures for
the licensor has the right of improvements, technical know-how and related
products that will be developed by the licensee during the valid term of the
contract. However, the licensor may not always claim these rights, and some
countries have strict restrictions on including these types of terms in the
licensing contract; Licensing is necessary if the product only sells best when
combined or sold for use with another product; Last but not least, the
licensing contract allows the licensor to hold ownership of the intellectual
property and at the same time receive licensing fees, in addition to the
profits gained from self-exploitation of such assets from products or services
sold or provided by that party.
Besides the advantages,
the licensing contract also has some disadvantages for the licensor. The
licensee may become a competitor of the licensor. The licensee may make the
licensor make less remuneration than the business losses resulting from the
competition of the new competitor; The licensee may unexpectedly request
contributions, for example, for technical assistance, human resource training,
additional technical data, etc. It is important that the licensing contract must
clearly stipulate the rights and obligations of the parties, whereby any
disagreements that occur in the future can be resolved quickly and effectively;
The licensor’s revenues depend on the skills, capabilities and resources of the
licensee. This dependence is even greater in the case of exclusive licensing.
The provisions of minimum wage and other provisions may be provided to avoid
this, but this is still a concern.
Secondly, for the
licensee, the advantage of a licensing contract is allowing access to
technology that has been developed or is available to apply for helping
businesses access to the market more quickly; Small companies may not have the
resources to do and carry out the research to supply new and higher quality
products. The licensing contract allows enterprises access to technical
advances that are difficult to achieve by other measures; Licensing may also be
necessary to maintain and develop an established market position but be
threatened by new designs or production methods. Access to new technology
through a licensing contract is the best way to overcome this challenge; There
may be many opportunities to get a license when combining with existing company
technologies can create new products, services and opportunities in the new
market.
Regarding the
disadvantage to the licensee, the licensee may have to make financial
commitments to technology that is “not yet ready” for commercial exploitation,
or need to modify the technology to meet its business needs; An intellectual
property licensing contract may result in additional costs for the product.
Many technologies integrated into products can create products with high
technology content but are very expensive when publishing to market; Licensing
may create technological dependence on suppliers, who may not extend the
licensing contract and negotiate a licensing contract with other competitors to
limit the market or to limit exploitation activities which was allowed in
accordance with licensing contract.
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