If you’ve decided to expand your brand internationally, you will likely consider an intellectual property license to maintain control. Australian companies typically choose to retain their manufacturing and selling rights in Australia, and provide overseas partners with a license to commercialise, manufacturer 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?
Step 1: Identify your goals for expansion
Who will manufacture and develop your products? You may like to allow the potential licensee to have exclusivity to sell to specific regions and bear responsibility for the manufacturing and or selling.
- 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?
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 the values of your brand and wants to grow your business. When looking for a licensee, take steps to effectively communicate the purpose and goal of your commercial relationships.
Step 3: Negotiate your agreement
Once you have identified the eligible party, you will then negotiate a contract that addresses both parties’ needs. During the negotiation, you may want the other party to sign a confidentiality agreement and draft a Heads of Agreement.
The license agreement must address:
- Territory to which the license is granted;
- The term of the agreement;
- Whether the licensee has exclusivity;
- Right of inspections;
- Clearly define 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 license agreement should serve as a tool to reduce into the writing the mutual aims and outcomes of the relationship between the licensor and licensee. It should be tailored to your specific needs and account for a termination or breach should one of the parties not correctly observe the terms.
What are the Benefits?
If you have an established Australian brand and you 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.You should also, however, weigh these advantages against the potential disadvantages such as entering into an unsuccessful relationship.
If you have any questions about drafting a license and distribution agreement for your business, international expansion or your responsibilities as a licensor, get in touch with our commercial lawyers on 1300 544 755.