In Short
- Ensure clear ownership of all intellectual property (IP) before licensing.
- Conduct thorough due diligence on potential licensees to protect your brand.
- Draft a strong agreement with precise territorial restrictions, quality control, and clear exit clauses.
Tips for Businesses
Before expanding internationally via licensing, confirm your IP ownership and check if protection is in place in target markets. Carefully select licensees with a track record of respecting IP rights. Ensure your agreement covers territorial restrictions, quality control, and post-termination provisions to safeguard your brand and creative assets.
Table of Contents
When your small business creates something genuinely innovative, whether that is a unique product design, a distinctive brand, or proprietary technology, expanding internationally can feel like both an exciting opportunity and a legal minefield. Licensing deals offer a way to expand globally without the enormous costs of setting up operations in every market, but they also put your creative assets in someone else’s hands. Getting it wrong can mean watching your intellectual property slip away or finding knockoffs flooding markets you thought you would protect.
The reality is that international licensing entails more than simply finding the right partner and signing on the dotted line. Different countries have radically different approaches to intellectual property protection, and what works in one place might leave you completely exposed elsewhere. This article will guide small businesses on navigating international licensing, protecting intellectual property, and drafting strong agreements.
LegalVision’s Trade Mark Essentials Guide provides valuable information for any business looking to register or enforce a trade mark.
Know What You Actually Own
Before you even think about licensing internationally, you need to be crystal clear about what intellectual property you actually have. It sounds obvious, but plenty of SMEs discover too late that they do not own everything they thought they did. That designer you contracted three years ago? Unless your agreement explicitly assigned all IP rights to your company, they might still own aspects of your product design.
Get your house in order first. Ensure you have proper assignments from employees and contractors. If you are relying on trade marks, check they are registered in the UK and consider whether you need protection in your target markets before you start licensing discussions.
Understand That Intellectual Property Rights Are Territorial
This is the part that catches people off guard. Just because you have a registered trade mark in the UK does not mean you have any rights in other countries. Each country has its own registration system, and in many jurisdictions, it is first to file rather than first to use that matters.
Continue reading this article below the formChoose Your Licensee Carefully
A licensing deal is essentially a long-term relationship where you are trusting someone else to represent your brand and protect your IP. Due diligence matters enormously. Investigate their reputation for respecting IP rights and their history with other licensors.
Ask for references and actually follow them up. Have they been involved in IP disputes? Do they have the resources and infrastructure to monitor for infringements in their territory? A licensee who cannot or will not protect your rights could actively damage your brand.
Draft Robust Territorial Restrictions
Your licensing agreement needs unambiguous geographical limitations. Define exactly which territories the licence covers and explicitly prohibit sales outside those areas. Failure to do so could undermine other territorial arrangements that your business may have.
With e-commerce, territorial restrictions have become harder to enforce but more important than ever. Your agreement should address online sales, parallel imports, and what happens if products end up in unauthorised markets despite everyone’s best efforts.
Include Strong Quality Control Provisions
Licensing your IP means your reputation is in someone else’s hands. Quality control clauses are essential for protecting both your brand and, in some jurisdictions, your trade mark rights. In many countries, a trade mark owner who does not exercise quality control over licensed products can lose their rights altogether.
Plan Your Exit Strategy
What happens when things go wrong? Your agreement needs clear termination provisions, but also needs to address what happens to inventory, marketing materials bearing your branding, and any improvements or derivative works the licensee has created.
Think about intellectual property ownership of any developments made during the licensing relationship. If your licensee improves your product, who owns that improvement? This needs to be explicit in your agreement.
Get Local Legal Advice
However good your UK solicitor is, you need advice from lawyers qualified in your target jurisdiction. Different countries have different requirements for licensing agreements, different approaches to IP protection, and sometimes different expectations about business relationships.
Key Takeaways
International licensing can open up significant growth opportunities, but protecting your creative rights requires preparation and strong legal frameworks. Ensure you have clear ownership of all IP before entering negotiations, and remember that IP rights are territorial, so your UK registrations will not automatically protect you abroad. Conduct thorough due diligence on potential licensees, focusing not just on their commercial capabilities but also on their track record with intellectual property. Your licensing agreement should include precise territorial restrictions, robust quality control provisions, and clear termination clauses that address what happens to your IP when the relationship ends. Finally, always seek local legal advice in your target jurisdiction, as IP law and enforcement vary considerably between countries.
If you need help protecting your creative rights, our experienced intellectual property lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to solicitors to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
It depends on the type of intellectual property and your risk tolerance. For trade marks and patents, registration in each target country provides the strongest protection, though this can be expensive for SMEs. The Madrid Protocol for trade marks can help by allowing you to file in multiple countries through a single application. Copyright protection is generally automatic in countries that are signatories to international treaties like the Berne Convention. At a minimum, you should register in any country where you are granting an exclusive licence, as your ability to take action against infringers may be limited without it.
This is why your licensing agreement needs robust post-termination provisions. Include clauses that prohibit your licensee from using your IP after the agreement ends and require them to destroy or return confidential materials. Consider non-compete clauses for a reasonable period, though enforceability varies by jurisdiction. Whilst you cannot stop them using general knowledge, you can contractually prevent exploitation of your specific IP and trade secrets.
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