Last Updated on December 14, 2022 by Anda Malescu
Licensing international business transactions gives a licensee certain rights or resources to manufacture or market a certain product in a certain country, often called the host country. Licensing represents a business arrangement in which one company gives another company or individual the permission to manufacture its product for a specific fee. This arrangement can include allowing the licensee to use the patents, trademarks, copyrights, designs, and other intellectual property rights of the licensor, in exchange for a percentage of the revenue or a fixed fee. Licensing can also be perceived as taking advantage of a company’s already existing organization and infrastructure in exchange for a price. This article presents the advantages of licensing international business transactions.
One of the greatest advantages of licensing international business transactions is that a company can manufacture a proprietor’s product for a fixed term in a specific market, in exchange for an amount of money. The license can be either exclusive or non-exclusive. For instance, in a foreign market, a licensor in the home country makes limited rights or resources available to the licensee in the host country. This can include patents, trademarks, managerial skills, technology, and other resources, for the licensee to be able to manufacture and sell in the host country a product similar to the one that the licensor produces in the home country.
Licensing also presents an advantage in countries where there are barriers to import and invest, in the so called “closed” markets. Licensing represents a quick and relatively easy method to enter into a foreign market, allowing the foreign company to “jump” borders and tariff barriers.
Another important advantage of licensing international business transactions is that they present lower risk since the licensee company enters the market with an established product and therefore, the financial and legal risks are lower.
Moreover, if a company chooses to offer an international license to a foreign company it does not need the capital usually required to invest in the foreign country. There is a lower threshold for capital requirements. A licensee can benefit from this type of arrangement because it requires less money from the start to pursue the business opportunity. The company can purchase a license instead of outright ownership and start to make profit faster. Also, less upfront cash is required when you purchase a license rather than when you inject capital in a new business from the beginning. In the end the new business can also benefit from the reputation and consumer awareness of the product being manufactured under the license.
Licensing creates an opportunity for passive income for the licensor. The licensor does not need to do anything actively to generate revenues from a license. After developing the intellectual property, a company can just license it and such sources of revenue can last for several years without interruption. An example in this respect is Microsoft.
Contact us or schedule a consultation with your international business attorney in Miami, Florida USA to assist you in your licensing international business transactions needs and show you the advantages of licensing international business transactions.
Malescu Law P.A. – Business Lawyers
