Unlocking Asia through licensing

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Whether you’ve developed new technology, artwork, medicine, software, a piece of music or a new plant, many “creations of the mind” come under the banner of intellectual property (IP).1 These creations are often an important source of income for their owners and laws are place to recognise and protect their use.

Why license out your IP?

There are a number of commercial reasons and benefits to licensing out your IP to another party. For example, some IP owners do not wish to relinquish ownership of their patents or trade marks but cannot, ordo not want to, be involved in the manufacturing of the products to which the patents relate or which bear the IP owner’s trade mark. Instead they may look for the better manufacturing capacity, wider distribution outlets, greater local knowledge and management expertise of another company – a company who would become a licensee of their IP.

It is important to carefully consider the scope of a licence and the extent to which the licence should benefit both the IP owner (i.e. the licensor) and the licensee. For the owner, it can mean an agreed sum of income and a way for commercialising a product. For the licensee, it can provide certainty of being the sole or one of the exclusive recipients of profits after bringing the product to market.

A pathway into new markets

‘Licensingout’is one way of accessingnewmarkets. Rights can be assigned for a specific time and region to the licensee, granting them the right to market and distribute your product and thus enabling the brand to get established in the new market. The licensee may even agree to make all the adaptations required for entering that new market, such as translating labels and instructions and modifying goods so they meet local laws and regulations. Australian registered businesses are leveraging these opportunities, driving Australia to be a net exporter of IP to non OECD countries.³

Measures to ensure quality control by the licensee in a particular market are also commonly featured as a condition of a license. However, licensors must still be prepared to find ways to enforce these measures, which may need to be customised and adapted depending on local laws and practices. In Japan, for example, government agencies, companies and the public work together to manage enforcement. Methods can be as simple as sending warning letters.⁴[Source: IP Australia Is this a quote from an online source? If so, include the reference.]

Enforcing IP protection more broadly across Asia has been strengthened with the development of free trade agreements (FTAs). Australia has 10 free trade agreements in place, 7 of them with Asian economies. According to Australia’s Department of Foreign Affairs and Trade, IP commitments are standard in developed economy FTAs. IP commitments also feature in agreements between Australia and China, the USA, Singapore, Japan, Korea, and Thailand.

Singapore Australia Free Trade Agreement (SAFTA)

The SAFTA is one example of an FTA which specifically addresses IP. As well as confirming their WTO commitments on IP protection, Australia and Singapore agree to cooperate on eliminating trade in goods infringing IP rights, including by exchanging information. They also agree to take measures to prevent the export of goods that infringe copyright or trademarks on receipt of information or complaints. As part of SAFTA, Australian and Singapore have also committed to protecting IP and confidential information supplied in government procurement tender processes.

Important considerations for licences

A formal and effective written licence agreement is critical to ensure that your business obtains the rights required to meet your business’ commercial objectives as well as to protect your rights.

As mentioned previously, it is important to carefully consider the scope and limits of a licence. It is common for licences to include restrictions around the use of IP to a specific product, field of application, geographical area, duration and/or sub-licencing. It is critical to determine the IP being licensed (for example, a product could encompass several types of IP rights, including patent, trade mark and design rights).

“Licences should be customised to comply with, and be cognisant of, local laws and business practices, so it’s critical for any prospective licensor or licensee to have early and ready access to the right professional advice on the ground” says Stephanie Rowland, Partner in Mills Oakley Perths’ Corporate Advisory & IP/IT team.

Ranking second regionally for its protection of IP rights, patents and copyrights, Australia is regarded as one of the safest places to commercialise IP.⁵ Enforcing IP protection across Asia has been strengthened with the 10 free trade agreements Australia has in force with China, Japan and Singapore amongst others.

Regardless of what or where you are licensing, IP owners should seek advice from IP professionals with relevant expertise.

Disclaimer

The content of this article is provided for information purposes only and does not constitute legal advice.

For further information regarding IP licencing opportunities contact Greg Nicolson, Australian Business Migration Australia

Sources:

1,2. IP Australia

3. Australia’s FTAs Support Our Intellectual Property Interests And Do Not Drive Domestic Policy Outcomes, August 2016, Department of Foreign Affairs and Trade, Australian Government

4. IP Australia, Enforcing Your IP Overseas

5. International Property Rights Index 2016