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If you have decided to expand your brand internationally, you will likely consider an intellectual property licence to gain international exposure and maintain control. Australian companies typically choose to retain their manufacturing and selling rights in Australia, and provide overseas partners with a licence to commercialise, manufacture and sell their product overseas. This allows for growth and expansion across borders without having to ‘set up’ abroad. So, what does this look like, and how do you benefit from this relationship?

Commercial Benefits of Brand Expansion

Once you have set up your business and established your branding, a key growth step is to expand your brand. Your branding is how consumers and clients will recognise your business. Therefore you must register your brand (e.g. by applying for a trade mark). If you have growth plans, commercialising your business can help you accelerate your growth milestones. 

There are a few ways that you can expand your brand. One of the main methods to commercialise in an international market is through a licence agreement. This agreement allows you to grant overseas businesses the right to use your branding, effectively ‘testing the waters’ in an overseas market without you having to commit to establishing your business overseas. So, for example, if you run an IT service provider business, you can licence your IP to an overseas business in the US, allowing the US business to provide your IT services to overseas clients.

Licence Agreement

Step 1: Identify Your Goals for Expansion

The first step is to determine what your expansion plans are. Who will manufacture and develop your products? You may want to allow the potential licensee to have exclusivity to sell to specific regions and bear responsibility for the manufacturing and or selling of your goods or services. For example, consider:

  • What will happen with research and development on new products and ranges?
  • How do you want the licensee to build and promote your brand?
  • How much control do you want over the end product?
  • What kind of commission will the licensee receive?

Step 2: Find Your Licensee

Licensing the rights to your brand or product overseas requires you to trust that the other party will act in your business’ best interests. You then want to ensure that the other party reflects your brand’s values and wants to assist in commercialising your business. Therefore, when looking for a licensee, you should take the time to communicate the purpose and goal of your commercial relationships effectively.

Step 3: Negotiate Your Agreement

Once you have identified the eligible licensee, you will then negotiate a contract that addresses both parties’ needs. For example, you may want the licensee to sign a confidentiality agreement and draft a heads of agreement during the negotiation.

The licence agreement must address:

  • the country to which you grant the licence;
  • the term of the agreement;
  • whether the licensee has exclusivity; 
  • right of inspections;
  • the IP to be licensed (i.e. trade mark, design registrations, trade secrets, raw materials, promotion materials, customers lists, production specifications, market research, etc.);
  • confidentiality; and
  • termination and dispute resolution for a breach.

The licence agreement should serve as a tool to outline the mutual aims and outcomes of the relationship between you (the licensor) and your licensee. It should be tailored to your specific needs and account for termination or breach should one of the parties not correctly observe the terms.

Key Takeaways

If you have an established Australian brand and want to limit the risk of overseas expansion, you should consider taking on a licensee. As the licensor, you can retain a portion of licence fees and see your brand thrive in the international market. However, you should also weigh these advantages against the potential disadvantages, such as entering into an unsuccessful relationship.

Here are some key considerations for if you want to licence your brand overseas:

  • Do your research! Start with simple market research into your desired overseas regions.
  • Research your potential licensees. Do they have the same business values? Will they respect and further your business plans?
  • Make sure your terms with the licensee are clearly defined. Again, the negotiation stage is key.
  • Have a lawyer draft the licence agreement.

If you have any questions, LegalVision’s intellectual property lawyers can help. Contact them on 1300 544 755 or fill out the forms on this page.

Frequently Asked Questions

What is an IP licence agreement?

An IP licence agreement is a document that specifies how another party will use your IP. It sets out the rights and obligations of each party. This is an important document to have in place if you want to allow other parties to use your IP.

Is an IP licence agreement necessary to licence your brand overseas?

Yes. A licence agreement will also include key provisions such as IP ownership, how a party will use or modify your IP, dispute resolution if a dispute was to occur in another jurisdiction, and more. If you have found an overseas party that will help you expand your business overseas, you should contact a legal professional to help you draft the agreement.

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