Foreign licensing of intellectual property rights

Foreign licensing of intellectual property rights

Expanding the existing business, in terms of market and business sectors, or improving goods or service quality and position on the market are the inevitable need of an enterprise. In many cases, the transfer of intellectual property rights is one of the effective tools to achieve these business targets. In the context that global commercialization is an inevitable trend, the international transfer of intellectual property rights, such as receiving the transfer of the right to use intellectual property abroad to Vietnam or vice versa, is increasing.  

However, with special mechanisms of the law on intellectual property, Vietnamese licensee enterprises (receiving the right from foreign enterprises) must pay attention to the following: 

  • Firstly, before being transferred the right to use any type of machinery or products from a foreign counterparty, the Vietnamese licensee enterprise must check whether the related intellectual property rights have been protected in Vietnam.  

Regarding intellectual property rights to industrial property objects (industrial designs, inventions, or trademarks, etc.) with the territory nature, these objects shall only be protected within the countries where they have been registered. In an international context, an intellectual property right transfer contract should be performed only in case the transferred intellectual property right is also protected in another or other countries where the transferee enterprise’s business is expected to be conducted. Because the intellectual property right is not protected, there is no ground for the transfer of intellectual property rights, and at the same time, the owner or transferee cannot forbid others from using such property. 

  • Secondly, ensuring that the contract signatory has full competence and obtains necessary internal approvals. 
  • Thirdly, it is required to clarify the scope of intellectual property licensing: Monopoly – non-monopoly, and whether the sub-licensing is allowed or not. 

The clarification of the licensing scope plays an important role, not only decides the scope of rights that can be used but also affects the plan for exploiting the transferred objects. Therefore, this issue should not be underestimated.  

  • Fourthly, ensuring that the transfer of rights is applied to all intellectual property rights related to the intellectual property expected to be transferred.  

Intellectual property can contain many different intellectual property rights, for example, a cake production line can have both patent protection for the process, trademark protection for the product name, industrial design protection for packaging, etc. Enterprises should identify all intellectual property rights related to the object to which they intend to receive rights and negotiate all such rights in the same contract.  

  • Fifthly, regarding the transfer price. 

The transfer prices are usually the royalties that the licensee pays to the licensor for the privilege of using the respective intellectual property rights. Both licensor and licensee should value the royalties by valuing the intellectual property and assessing potential market value. 

In addition, the parties must also reach an agreement on the method of calculating royalties: payment term, the currency used for payment, and other issues (tax). 

Last but not least, a transfer agreement is one of the more complex types of contracts. Therefore, it is advised to consult an intellectual property lawyer for counseling and drafting accordingly. 

Disclaimer: This article is for general information only and is not a substitute for legal advice. Apolat Legal is a Vietnamese law firm with experience and capacity to advise on matters related to Intellectual Property Rights. Please click here to learn more about our services and contact our lawyers in Vietnam for advice via email info@apolatlegal.com.

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