International Licensing Structuring Deals Worldwide
International Licensing - Structuring Deals Worldwide 1. Introduction Licensing of intellectual property rights outside the United States contains all of the challenges associated with such licensing in this country and a number of additional ones. ... Nevertheless there has been a general tendency in recent years towards the adoption of detailed written contracts for licensing of intellectual property rights throughout the world. ... In licensing of intellectual property one is talking about an agreement for an ongoing relationship which hopefully will last for many years and wherein, however good ones crystal ball may be at the time when one drafts the agreement, one cannot foresee every eventuality and make proper provision for it in the contract. ... A further complication in the international field lies in the constraints imposed by different legal systems. ... Such inhibitions in effect place limitations on a licensing strategy since they affect the value of the property being licensed. For all of these reasons, the most important thing to bear in mind in international licensing of intellectual property is the same as that which applies to domestic licensing, namely that one must be careful about how one chooses ones partner. This, however, is even more important in the international field then it is domestically in view of the cultural and legal differences sketched above. It is therefore important to have a clear idea as to what one is setting out to achieve by an international licensing agreement. ... It is therefore desirable to carry out a proper inventory of ones rights, and to check whether any of them are under challenge before entering into a licensing negotiation. ... Escape Routes The factors discussed above lead to a conclusion that one of the most important clauses in many international intellectual licensing agreements is the termination clause defining how the agreement can be terminated. ... International Licensing - Types of Agreements All forms of intellectual property rights are in principle licensable, that is to say patents, designs, trademarks, and copyrights. ... Interest in international protection of designs has increased significantly in recent years and is something which should be borne in mind when considering the portfolio available for licensing, particularly in view of the fact that it may be possible to secure design protection in some countries where the standard of inventivity or lack of functionality might not be sufficient to secure protection in the United States. ... In addition to these traditional intellectual property rights, one may add licensing of know-how. ... Whether this situation will improve following the adoption of a new international code relating to Trade Related Intellectual Property Rights (TRIPS) as part of the Uruguay Round for modernizing the GATT remains to be seen. ... As long as one falls within this definition therefore, one can be reasonably assured that in WTO-member countries a contract clause granting licensing rights for such trade secrets will be upheld. ... Mundane Provisions of an International License Agreement Before looking at what has over the years been one of the more difficult aspects of international intellectual property licensing, namely the interface between proper exploitation of intellectual property rights and antitrust or completion law, it is worthwhile looking at some of the more mundane issues that need to be considered in an international license agreement which may be less significant in a domestic agreement. ... For example in international agreements, in addition to issues that arise in domestic licenses it may be necessary to deal with financial issues, jurisdictional issues, technical assistance issues, and a number of other issues. ... It is, therefore, important when entering into an international license agreement to check on the withholding tax rates in the countries in question and to ensure that language is included in the agreement to enable the licensor to take full benefit of any double tax treaty that exists between the country of the licensee and the United States. ... If it is decided to have an arbitration clause (as is common in many international agreements) some thought should be given to where the arbitration should take place. ... Traditionally, those of the International Chamber of Commerce or the London Court of Arbitration have commonly been used. ... These have the advantage (or disadvantage) that the rules governing the procedure of the arbitration do not derive from the body appointing the arbitrator (the UNCITRAL rules leave it to the parties to devise a mechanism for appointing the arbitrator), and that the fees may therefore be lower than if one relies on the International Chamber of Commerce to run the arbitration. The Stockholm Chamber of Commerce also has a good reputation for dealing with international disputes. ... As a further alternative some form of alternative dispute resolution may be specified in the agreement, although this is still not common in international license agreements. ... 3 Sublicensing Another issue which needs careful consideration in connection with international agreements is the question of sublicensing. ... It is, therefore, desirable to ensure that an international agreement contains a specific statement by what is meant by "exclusive". ... Substantive Inhibitions on Licensing Fifteen or even ten years ago this section would have been the longest part of this paper. ... In Korea, although most limitations on intellectual property rights licensing have been abolished in recent years, there still remains a prohibition on charging royalties for a trademark license unless the licensor provides technical assistance to the licensee. ... If such clauses are included in international license agreements, the exact wording used needs careful consideration. ... Although problems with tie-ins arise outside the field of intellectual property licensing, they are of particular concern in this area. ... Other antitrust type issues such as price-fixing and inhibitions on dealing with competitors, are of course also relevant to intellectual property licensing but do not present many issues that are specific to intellectual property licenses. ... As of April 1, 1996, two previously existing group exemptions, one relating to patent licensing and the other relating to know-how licensing, have been combined into a single exemption applying to technology licensing in general, although for agreements between relatively small enterprises protection may also be found in the Notice on Minor Agreements. ... The group exemption specifically does not extend to licensing of designs, trademarks or software except when the licensing of such rights is clearly ancillary to the main purpose of the agreement. ... it is more convenient to base the royalty calculation on the finished products (in other cases where it is inconvenient to do otherwise, royalties may also be based on consumption of raw materials); 11) package licensing of additional patents or know-how which is not necessary in order to guarantee the effectiveness of the basic licensed subject matter; 12) the imposition of arbitrary termination provisions in favor of the licensor; 13) Imposing on the licensee an obligation not to contest the validity of a licensed patent or the secrecy of any licensed know-how. ... laws impinge on international technology licensing, namely the antitrust laws and those that control the export of technology. ... Antitrust laws to International Technology Licensing Since this paper is chiefly concerned with licensing Intellectual Property rights in an international context, the general question of the Application of U. ... It should, however, be noted that the Justice Departments Guidelines on International Operations and Licensing of Intellectual Property both state that they apply to the licensing of intellectual property abroad, although neither contains any specific example of problems in this field. In any case, at present the antitrust laws are of much less concern in the field of intellectual property licensing than was the case twenty years ago. The Department of Justices Intellectual Property Guidelines today even have a subheading "Procompetitive benefits of Licensing". ... Finally, it should be noted that the requirements of the Hart-Scott-Rodino Act[1], which requires that parties to a deal must give prior notice to the Federal Trade Commission and which primarily applies to mergers and acquisitions of companies, may apply to certain exclusive licensing deals. ... Export of technology is controlled by regulations made by the Department of State concerning, the supply of technology abroad in connection with arms[3] (these provision applying whatever the country to which transfer of technology is intended), regulations by the Department of Energy[4] concerning the transfer of unclassified information relating to atomic energy abroad (these also being of general application) and regulations made by the International Trade Administration Office of the Department of Commerce which administers the Export Administration Act, and is the branch of government one encounters most frequently in this field. ... Conclusion International licensing today is less fraught with difficulties than it has been previously. ... Above all, however, the difference between domestic licensing and foreign licensing lies in the need to make sure that you know who you are dealing with and the need to provide for an exit route if something goes wrong.