54022 UKTI License BroAW
-
Upload
tarsem-singh-maan -
Category
Documents
-
view
225 -
download
0
Transcript of 54022 UKTI License BroAW
-
8/2/2019 54022 UKTI License BroAW
1/12
ACCESSING INTERNATIONAL MARKETS
A G Sssl Lsg
54022 UKTI License BroAW.indd 1 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
2/12
Why A LicenSinG Guide?
Trading internationally is good or business andi approached correctly it can be very protable.This guide has been produced to provide a basicintroduction to licensing and ranchising. It will help
UK companies who are considering developing urthertheir interests in overseas markets particularly thosethinking about licensing or ranchising. UK Trade &
Investment provides a range o services to help UKcompanies develop business in overseas markets, notonly or those companies looking to export productsor sell services into their chosen markets, but also or
those thinking o establishing a permanent presencein an overseas market as a means o accessingopportunities in that particular country or region.
Investing in an overseas market is oten bothcomplex and risky. The purpose o this guide is
to help UK companies understand how they mightreduce some o the risks associated with licensingand maximise the opportunities to benet rom this
type o investment.
It shows how adopting a structured approachcan reduce some o the risks. It also highlights
the various sources o advice and other assistancethat UK companies can access both rom UKTrade & Investment and other partners.
This guide has been produced by UK Trade &Investment in conjunction with Virtuoso Legal, a
boutique law rm specialising in intellectual property,licensing and ranchising. UK Trade & Investment is the
UK Government organisation that helps UK companiestrade successully in international markets. It comes
to you ree because we are committed to helping UKcompanies trade protably and eectively overseasand that always means evaluating the most benecialapproach to accessing customers in those markets.
In this guide you will nd a range o useul tips -
other inormation including access to training andsupport can be ound by visiting our websiteat www.ukti.gov.uk
Who ShouLd uSe it?
This guide is aimed at UK companies o any size who
are seeking to capitalise on overseas opportunities.In particular, it is aimed at those companies who arelooking to take their international business a stage
urther than simple exporting and who are consideringwhether licensing might be the best next step or themto expand urther.
This guide can be used by both manuacturing and
service companies, by companies with no experience othe market under consideration and by those who arealready trading with the target market.
Likewise, the guide can be used by your managementteam as a useul planning tool or by a UK companyalready planning urther international expansion.
While the guide ocuses on licensing and ranchising,much o the material is equally relevant to other orms
o overseas investment, or instance establishing a jointventure or a wholly owned subsidiary.
INTRODUCTION
02 UKTI LICENSING BROCHURE
54022 UKTI License BroAW.indd 2 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
3/12
RoyALty StReAmS And VALuAtionS
o inteLLectuAL PRoPeRty
One o the most common questions asked is Whatis a particular piece o technology worth in terms o
outright sale value? or indeed When licensed, whatcould one expect as a royalty stream?. A number oactors aect this and it is essential to take expertadvice. It is extremely dicult to value intellectual
property and it is a very dierent process rom
valuing bricks and mortar. With tangible assets suchas commercial buildings there will be an acceptable
norm in any particular locality or a type o building.Unortunately, technology is oten unique in the marketplace and it can thereore be a complex and timeconsuming process to x any sort o value to it.
To a certain extent the same happens with royaltystreams, although dierent industries do have acceptednorms as royalty values. A number o accountants andsolicitors specialise in this area and it is important to
get the right advice early on so that negotiations canproceed on a proper commercial basis.
Factors aecting the value o technology will includethe cost o creating the technology, the uniquenesso the technology, barriers or other people entering
the market, whether or not the technology can belicensed and so on. When considering licensing it is
vital to consider the income streams that are likely to
be generated once the product is licensed. Obviously,products with mass market appeal can generate hugeincome streams even i the royalty payable on eachindividual item is very small. On the other hand,
technology which is in a niche arena may attract amuch higher individual percentage royalty paymentsimply because it is not capable o mass exploitation.
AN INTRODUCTION
TO LICENSING
Lsg s prl rs,
spall s w a
rgg s wrl.
i s, wvr, r bssss
a vr ral ppr axs
sras lg a
xpl lg w ars.
mAkinG money Rom technoLoGy
Licensing is basically the grant o a right to dosomething, usually in return or a payment alsoknown as a royalty. The situation in respect o licensingis analogous to someone owning a house and letting
dierent parts o the house to dierent tenants. Aswith a multiple occupancy building, dierent tenantscan be granted a variety o rights to occupy, exploit
and use some parts o the property. However, a licencedoes not grant the tenants any rights in the physical
bricks and mortar o the property. The licensee has theright to use the patent, know-how, trade mark, design
right or copyright etc, but the licensee does not ownthe legal title to it, nor (unless specically permitted
by the licence) are they oten granted rights to grantsub-licences o the intellectual property.
Most people are vaguely aware o licensing through
the sotware industry. At some point most people willhave clicked to accept a Microsot sotware licenceor something similar. In act, the wealthiest companiestoday are ones such as Microsot and IBM who depend
on clicks not bricks as assets. Licensing is thereoremuch more widespread than would rst appear.
Licences are widely used in the automotive industry.Licensing allows a car manuacturer to invest a greatdeal o resources in developing new technology, such
as new brakes or gearing, and then to licence thistechnology to other car manuacturers in return or aroyalty. This type o cross-licensing is widespread and
by collaborating in this way many manuacturers canrecoup the costs o research and development muchsooner than they would by simply using the technologypurely to their own advantage in their own products.
UKTI LICENSING BROCHURE 03
54022 UKTI License BroAW.indd 3 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
4/12
key AdVAntAGeS o LicenSinG oVeR
otheR StRuctuReS
Many companies look at joint ventures or partnershipsand collaborations especially when considering
developing overseas markets. The big problem withjoint ventures and similar vehicles is that the partiesbecome jointly responsible or a number o issues, suchas nances and management o the company, when in
practical terms it is likely to be more commercial or one
party to have responsibility or certain decisions alone.Joint ventures can work well but they are inherently
fawed in terms o joint management decisions andthis is oten where disputes arise. On the other hand,licensing permits the exploitation o new technology
without the burden o managerial decisions or both
parties. Having said that, however, it is important orboth licensor and licensee to understand commerciallywhere the markets lie and to agree a joint marketingstrategy o some kind in order to achieve maximum
sales. Unortunately joint ventures oten ail as theyrequire a like-minded business culture, which can bedicult to achieve especially in an overseas market
where business practices, attitudes and cultural valuescan vary widely.
Joint ventures can also be extremely expensive toset up as the legal costs involved may be signicant.There are countries, however, where it is impossible
to trade unless one has a local party who is domiciledin that country. An arms length licence may avoidsuch problems.
04 LICENSING BROCHURE
54022 UKTI License BroAW.indd 4 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
5/12
AdvANTAGES dISAdvANTAGES
A licence allows a company to take a product tomarket without the expense o setting up locally andall the risks and costs associated with that.
It is important or the company to nd the right partnerto licence with in a local situation. Understanding
what an overseas partner can do is essential to makinglicensing a success. UK Trade & Investment can help in
nding the right individual or company.
A larger and more powerul licensee in a new marketcan provide instant market access and deter
competitors and imitators.
It is important to ensure that there are proper controlprovisions in the licence. It is especially important with
licensing to have a well-drated licence drawn up byexperts. The licence should contain things such as ullaudit provisions and as licensor it may be importantto police those audit provisions.
A licence can be used to enable products to besupplied locally where there is no opportunity tomanuacture in the locality.
In the long term, royalty payments rom a licence maynot provide the maximum return or a licensor. It could
be that setting up locally can generate better prots inthe long run.
It is possible with the right kind o licence and overseasbusiness partner to create an extensive market presencevery early on in the products lie cycle. This will helpmake maximum prots or the licensor.
It is absolutely key to the success o the licence orit to be properly negotiated and drated. Licensingcan be a complex arrangement and it is important ora licensor to be properly guided in terms o royalty
payments, audit provisions and minimum sales.In certain circumstances it is possible to divide up aparticular market so that dierent companies can licencethe same product but apply it in dierent areas. For
example, it is possible to take disinection kits and divideup the market into human and animal markets then nddierent companies with the right market presence.
The licensor is oten required to provide technicalassistance and training in brand standards etc.depending upon where the licensee is based. This will
need to be actored into the licensing arrangements.
It is possible to work with a licensee in a oreign
market and learn rom them. For example, it may bepossible to improve products or to adjust them so thatthey meet local market needs. This can oten be done
early on in the products lie cycle to help achieve
better market coverage.
The licensor must be satised that the licensee can
make a local market rom the products. Some productsare more popular in some cultures than in others.
An overseas licensee may well save a lot o expensein terms o research and development. For example,
reciprocal licensing in the car and telecommunicationsindustries enables companies to exploit the ruits oresearch carried out by one company alone.
Where well known brands are licensed overseas, the
local licensee can take advantage o an establishedbrand with a known name and goodwill. It is veryimportant or the licensor to ensure that brand
standards are maintained in an overseas market.
It is possible to negotiate urther income streams romsupport services and training.
LICENSING BROCHURE 05
54022 UKTI License BroAW.indd 5 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
6/12
In the rst instance the key to any successul contractis to nd the right business partner. Successul licenseesmay come rom an existing pool o associates, suchas suppliers, manuacturers and agents already in
the target market. Beware, however, o not doingyour research. Make sure any partner has the rightinrastructure and reputation locally to take the projectorward. Do some due diligence on the company by
reviewing their company accounts and legal structure.Meet with key members o sta and nd out what
uture plans the company has. Ask yoursel whetheror not key sta members are likely to move on, taking
valuable market inormation and customers with them.
i s als pra sr pa
lsg r bsss. d
av ppl pla a a rbl
s r asss sss
vr. is apprpra s p a
br sla as w
prv r xprs a sr
s ar aar a sl
r spfa? hw as
wa b a vrsas ar?
Wll a lal g-bw
bas lagag r lral barrrs?
Both parties need to be clear about the structure oany licence. Heads o terms should be put orwardpro-actively rom day one. In addition your business
needs to consider the worst case scenario. How wouldboth parties walk away in a dignied manner i the
relationship just does not work? Be clear with yourlicensees as to what you expect. I you want a minimum
royalty or sales, then say so rom the beginning.Remember that dierent cultures have their owntraditions and culture, and even language can be open
to varying interpretations. UK Trade & Investment canhelp companies overcome some o these issues as theyknow the local business people and can be a source oinvaluable inormation not available elsewhere.
HOW TO BE SUCCESSFUL
WHEN LICENSING
06 LICENSING BROCHURE
che WoRkS
Che Works has been manuacturing anddistributing ches apparel and clothing orover thirty ve years and began exporting15 years ago rom its initial base in South Arica.
The business comprises various companies
owned by the ounding amily plus numerousindependent distributors across the globe.
Clothing is manuactured in Southern Arica,China and Bangladesh.
A new company has been created to house all the
intellectual property which consists o a varietyo trademarks and a design right registration.
Licensing is key to the companys intellectualproperty strategy and is held in an o shoreholding company.
The company enjoys the ollowing benets:
1 It has a clear system o registering and protecting
its brand.
2 The IP is held in one company to ensure nodisputes evolve regarding creation and ownership.
3 The company has the opportunity o licensing to
third parties in the uture should it wish to do so,
4 The licensing process is simple,
5 The assets o the holding company can be valued
due to the income stream,
6 The ringencing and valuation o IP could enable
the company to seek a higher valuation in theevent o a takeover/ fotation,
7 The IP holding company is ring enced rom anyo the trading companies thus ensuring a highlevel o asset protection.
54022 UKTI License BroAW.indd 6 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
7/12
Finally, get advice rom expert lawyers and accountants.What royalty gures will work or you and how andwhen will they be paid? The royalty rate o 5% onet sales is requently negotiated in many industries,
including automative, chemical, communications,computers, deence, energy, electronics, ood,ranchises, glass, household products, mechanical,medical, photography, sports, toys and waste treatment.
Higher royalty rates, or example above 15%, existin some industries, but they are rare and are usually
associated with protable technologies or wherehigher margins can be justied. A specialist lawyer andaccountant will help steer you through the mineeldo net versus gross royalty payments and howto calculate them. They will also advise on upront
payments and minimum and maximum royalties.This is by ar one o the most complex areas onegotiation and one which heavily infuences the
protability o the licensor. It may be expensive toget advice, but getting the basics wrong will provear more expensive in the long run.
LICENSING BROCHURE 07
toP 10 tiPS oR neGotiAtinG LicenSeS
Consider the type o licence that you aregoing to grant, e.g. exclusive, non-exclusiveor sole licence, and whether it should be
limited by eld o use and/or territory.
Consider careully whether the licensee will
be able to sub-license to a third party andon what basis.
Consider asking a licensee to enter into anon-disclosure / condentiality agreement
beore disclosing any inormation.
Have a clear licensing strategy or who youare going to license to consider whether
you need to establish a clear advantage in themarketplace beore licensing to competitors.
Remuneration or a licensor can be by wayo a license ee or by way o royalties. Decideon what basis the licensee will be expectedto make payment.
I you are providing a license o yourtechnology consider i you will provide the
licensee with technical assistance and supportand i you will charge or these services?
Consider a clause dealing with ownershipo any improvements in licensed technology.
Duration o licence how long will thelicence last?
Ensure the licence agreement clearly setsout the circumstances in which thearrangement may be terminated and
consequences o termination.
Consult specialist accountants or
solicitors or advice on the value oyour intellectual property and the terms
o the licence agreement.
1
2
3
4
56
7
8
9
10
54022 UKTI License BroAW.indd 7 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
8/12
honeymAn GRouP
The Honeyman Group is a UK based consultancy
company operating in the pharmaceutical andbiotechnology sectors. Over the past ew years,the company has successully developed new processtechnology or which it obtained some worldwide
patent and trade mark protection. The potential andscope or this technology went beyond the existing
UK and Irish markets o the companys core businessactivity, and it also had the potential to move into
several other market sectors. A strategy neededto be developed to move the company orwardmaximising rollout eciency and returns.
The method chosen by the Honeyman Groupwas to rst spin out the IP into a new company.
NewCo was ormed as a vehicle with the specicpurpose o rolling out the technology across the
World and was geared to this task, unlike the core
consulting business which clearly was not. As parto the process, NewCo gave an exclusive license back
to the core business to use the technology in the UKand Irish pharmaceutical and biotechnology sectors,
so there was no eective change or the existingbusiness. Thus, NewCo was able to enter discussionswith a number o potential licensees and partners
around the world, and was ree and unencumberedin these negotiations towards optimising the overalloutcome on a case-by-case basis.
Whilst IP was at the heart o this operationalstrategy, its use also enabled the Honeyman Group
to optimise its wider business and commercialobjectives in areas such as equity, unding,
and tax planning.
Trevor Honeyman, chairman o the HoneymanGroup Ltd says: Overall, we are very happy with
the outcome which made best use o IP to deliverour long-term goals and objectives.
08 LICENSING BROCHURE
Once you have got your licensing project up andrunning, it is important to maintain a good dialogue
with and ongoing support or your licensee. Regularinput on marketing strategy can be a useul way not
just o steering your product, but also o gaininginsight into what is happening in other markets. I yourlicensee gets useul eedback rom customers, or indeeddevelops the product or a local market, then you will
need to know.
Regular visits will also reduce the likelihood o beinghoodwinked over royalty payments. It is oten quiteeasy to do a quick audit and see i the licensee isreally being honest about what they sell. But it is
almost impossible to do this rom aar. A regular visitwill also fush out why something is or is not workingin a particular market. Poor sales could be due to
a number o reasons not just poor perormanceo the local licensee. It can also help both partiesplan what sales targets are realistic going orward.I the licensee provides raw materials or products
then this inormation will help business planningback in the UK to ensure gures or required materials
is accurate or the orthcoming period. It will alsobe useul inormation or investors, the bank andother interested parties such as shareholders.
A good accountant who knows about licensing canhelp with things such as establishing benchmarks orsales and prot. They can also help establish auditing
patterns and identiy the best payment mechanismsor licensors. By way o example, payment o royaltiesmay be best done in sterling rather than risk the
vagaries o currency fuctuations. It may be better
or cash fow purposes to be paid monthly ratherthan quarterly. You may also need to bear in mind
whether or not certain countries can actually makepayments overseas and how quickly. I you suspectroyalties have not been paid correctly, the licenceagreement should contain an audit clause that willallow you to instruct an accountant to check the
books and records o your licensee.
KEEPING THE PROJECT
MOVING FORWARD
54022 UKTI License BroAW.indd 8 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
9/12
LICENSING BROCHURE 09
AN INTRODUCTION
TO FRANCHISING
Franchising is a much abused term in the Englishlanguage. It is used to describe many businessrelationships but, in its true legal sense, it is a particularorm o licensing. Franchising usually occurs where one
company has a tried and tested product and businessmodel. This tried and tested business can then be rolledout to other potential businesses on a nationwide orindeed international basis. Franchising is particularly
popular in the USA.
Successul ranchising occurs in a range o industriesand oten works well where there is a customer serviceelement as well as a recognised product and brand.
Examples o successul ranchising include McDonalds
as a ast ood retailer and AutoGlym which sells carcare products.
In ranchising the know-how o a business i.e.its underlying business strategy is key to its success.
Franchising works particularly well where the ranchisor
advertises on a national basis and brings a well-known,tried and tested brand to the market. The ranchiseegets the benet o a head start in business by selling
well-known goods and services. In simple termsa ranchise is a sophisticated know how and trademark licence. In order to maintain brand standardsthe ranchisor will oten control the supply chain and
direct that products are sourced rom specic suppliersand are sold in a particular way. The ranchisor mayalso speciy things such as sta training and may
coordinate new customer enquiries which will comein via their national network.
As with licensing, ranchising can be extremely fexibleand can work very well or both parties provided thatthe ranchise agreement is drated airly. Franchisees
pay a royalty or the benet o using the brand, theknow-how and the ranchisors expertise. In returnthe ranchisor gets the benet o nationwide marketpenetration and can enjoy considerable success rom
a royalty stream.
Exhibitions are held around the country where youcan visit businesses oering a ranchise and discusshow it works. The British Franchise Exhibition is one.Attending a show like this can give you the opportunity
to have an initial look at what is on oer and is alsothe source o valuable advice and inormation.
In order to avoid legal pitalls and getting tied intoonerous terms it is important to have the support youneed rom experienced legal advisors and accountants.Some ranchise agreements contain unair obligations
and liabilities on you as the ranchisee. Remember theold adage an ounce o prevention is worth a poundo cure. Other business support organisations may also
be able to oer you advice and guidance on setting up
such a business.
54022 UKTI License BroAW.indd 9 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
10/12
ciA WoRLd ActBook
The US Central Intelligence Agency (CIA), publishesinormation on many key characteristics o world
markets. Categories include economy; people;geography; communications, transportationand the military.
www.cia.gov/cia/publications/factbook
inteLLectuAL PRoPeRty oice
Inormation regarding copyright, design, trademarksand patents.
www.ipo.gov.uk
LicenSinG eXecutiVeS Society
inteRnAtionAL
The Licensing Executives Society International(LESI) is an association o 33 national and regional
societies, each composed o men and womenwho have an interest in the transer o technology,or licensing o intellectual property rights rom
technical know how and patented inventionsto sotware, copyright and trademarks.
www.lesi.org
uk tRAde & inVeStment
Extensive inormation on all UK Trade & Investmentservices including a section on Investing Overseas.
For more inormation, visitwww.ukti.gov.uk
oReiGn And commonWeALth oice
Country inormation and up-to-date travel advice.
www.fco.gov.uk
hm ReVenue And cuStomS (hmRc)
HMRC provide a wide range o inormation and guidesto assist companies trading overseas. Guides includeintroductions to import & export; classiying yourgoods; relies and exemptions; monthly updates on
taris, duty schedules and trade statistics.
www.hmrc.gov.uk
doinG BuSineSS the WoRLd BAnk GRouP
Contains individual country and regional proles whichocus on regulations, protection o property rights and
constraints with quantitative indicators or each.
www.doingbusiness.org
coRRuPtion PeRcePtion indeX
Produced by Transparency International Limited,and providing an index o the perception levels ocorruption worldwide.
www.transparency.org
10 LICENSING BROCHURE
uk tra & ivs s Gvr
rgasa a spprs b pas
uk rag raall a
vrsas rprss sg la
uk. or rl s lp pas
rals r raal bsss
pal rg wlg rasr, a
-gg parrsp sppr. or psw Gvr, -p wlg
uk rgal bsss a a glbal wr
a s a q srag rsr.
WHERE TO GO FOR ADVICE
AND SUPPORT
54022 UKTI License BroAW.indd 10 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
11/12
Liz Ward is Principal at Virtuoso Legal, a specialist legalpractice. Liz is acknowledged as a Leader in her eld
by the 2010 edition o Chambers and is also ranked inthe Legal 500.
Liz has specialised in Intellectual Property andInormation Technology law and her expertiseencompasses an in-depth knowledge relating to
patents, trade marks, copyright, design rights, sotwareand condential inormation.
The work undertaken by Virtuoso Legal includesboth litigation in the High Courts and also licensingsotware, know-how, technology and brands in order tomake income streams or companies.
A member o the Chartered Institute o Patent Agents(CIPA) and the Institute o Trade Mark Attorneys
(ITMA), Liz is also currently Chair o the North EastSection o the Licensing Executives Society (LES) andregularly lectures and writes on matters relating to IPlaw.
For more inormation: www.virtuosolegal.com
ELIzABETH WARD
PRINCIPAL VIRTUOSO LEGAL
LICENSING BROCHURE 11
54022 UKTI License BroAW.indd 11 14/01/2011 16:50
-
8/2/2019 54022 UKTI License BroAW
12/12
A rag uk Gvr sppr s avalabl r a prl avsall Sls r Bsss. t sls ar avalabl qalgbssss, a vr vrg r vs a gras rg spals av, llabras a parrsps.
uk tra & ivs s gvr rgasa a lps uk-baspas s glbal , a s rspsbl r lvr w SB prs dvlpg yr iraal tra Pal aAssg iraal mars.
W als lp vrsas pas brg r g-qal vs
uks a awlg as erps bs pla r w s glbal bsss.
uk tra & ivs rs xprs a as rg s xsvwr spalss uk, a Brs basss a r plafs ar wrl. W prv pas w ls rqr b pv wrl sag.
r rr ra plas vs www..gv.r a s a r rgal f blw:
uk tRAde & inVeStmentyrsr & hbr Vra hs,2 Vra Pla, Ls LS11 5Ae
tl: 0113 394 9825ax: 0113 394 9834eal: @.rg.
Wras vr r as b a sr a ra gv s s
ara, r uk tra & ivs r s par dpars ( dpar r Bsss,
iva a Slls (BiS), a rg & cwal of), ap labl r a rrrs,
sss r slag sas, a warra s gv r rspsbl ap as
sag a val, fr, pa r r rgasa .
t papr s s a r 50 pr g was plp a 50 pr ec plp
r wll aag rss. t s ar vgabl l-bas a a rss r plas/rs a
laa vr s ssaabl, psabl a a b rl. Pbls Jaar 2010
b uk tra & ivs crw cprg.
Pbls obr 2010 b uk tra & ivs crw cprg
uRn 10/1180 - A G Sssl Lsg
ACCESSING INTERNATIONAL MARKETS