What is the advantages and the disadvantages of licensing contract?

Licensing of industrial property rights (Licensing) is one of the legal measures to transfer technology. In accordance with Law on Intellectual property in 2005 (amended, supplemented in 2009), licensing of an industrial property rights means permission by the owner of such industrial property object for another organization or individual to use the industrial property object within the scope of the owner's right. Licensing of industrial property rights must be established in the form of a written contract. There are three types of industrial property object licence contracts: Exclusive contract; Non-exclusive contract; Industrial property object sub-licence contract, detailing:

 

Industrial design in Vietnam

-Exclusive contract means a contract under which, within the licensing scope and term, the licensee shall have the exclusive right to use the licensed industrial property object while the licensor may not enter into any industrial property object licence contract with any third party and may use such industrial property object only with permission from the licensee.

-Non-exclusive contract means a contract under which, within the licensing scope and term, the licensor shall still have the right to use the industrial property object and to enter into a non-exclusive industrial property object licence contract with others.

-Industrial property object sub-licence contract means a contract under which the licensor is a licensee of the right to use such industrial property object pursuant to another contract.

What is the advantages and the disadvantages of licensing contract?

-Firstly, for licensor, licensing can be used to access new markets that are not easily accessible. By allowing the licensee the right to market and distribute the products, the licensor can more easily enter the market; Licensing contract may stipulate measures for the licensor has the right of improvements, technical know-how and related products that will be developed by the licensee during the valid term of the contract. However, the licensor may not always claim these rights, and some countries have strict restrictions on including these types of terms in the licensing contract; Licensing is necessary if the product only sells best when combined or sold for use with another product; Last but not least, the licensing contract allows the licensor to hold ownership of the intellectual property and at the same time receive licensing fees, in addition to the profits gained from self-exploitation of such assets from products or services sold or provided by that party. 

Besides the advantages, the licensing contract also has some disadvantages for the licensor. The licensee may become a competitor of the licensor. The licensee may make the licensor make less remuneration than the business losses resulting from the competition of the new competitor; The licensee may unexpectedly request contributions, for example, for technical assistance, human resource training, additional technical data, etc. It is important that the licensing contract must clearly stipulate the rights and obligations of the parties, whereby any disagreements that occur in the future can be resolved quickly and effectively; The licensor's revenues depend on the skills, capabilities and resources of the licensee. This dependence is even greater in the case of exclusive licensing. The provisions of minimum wage and other provisions may be provided to avoid this, but this is still a concern.

-Secondly, for the licensee, the advantage of a licensing contract is allowing access to technology that has been developed or is available to apply for helping businesses access to the market more quicky; Small companies may not have the resources to do and carry out the research to supply new and higher quality products. The licensing contract allows enterprises access to technical advances that are difficult to achieve by other measures; Licensing may also be necessary to maintain and develop an established market position but be threatened by new designs or production methods. Access to new technology through a licensing contract is the best way to overcome this challenge; There may be many opportunities to get a license when combining with existing company technologies can create new products, services and opportunities in the new market.

-Regarding the disadvantage to the licensee, the licensee may have to make financial commitments to technology that is "not yet ready" for commercial exploitation, or need to modify the technology to meet its business needs; An intellectual property licensing contract may result in additional costs for the product. Many technologies integrated into products can create products with high technology content but are very expensive when publishing to market; Licensing may create technological dependence on suppliers, who may not extend the licensing contract and negotiate a licensing contract with other competitors to limit the market or to limit exploitation activities which was allowed in accordance with licensing contract.

We are a law firm in Vietnam with international standard, local expertise and strong international network. We focus on customers’ needs and provide clients with a high quality legal advice and services. For advice or services request, please contact us via email ant@antlawyers.vn, or call us +84 24 730 86 529

 

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Renew the validity of protection titles to subject matter of industrial property

According to the Law on Intellectual Property in Vietnam, the subject matter of industrial property rights shall comprise inventions, industrial designs, designs of semi-conducting closed circuits, trade secrets, marks, trade names and geographical indications.

Industrial design in Vietnam

Rights to an invention, industrial design, layout design, mark shall be established on the basis of a decision of Intellectual Property Office of Vietnam to grant a protection title in Vietnam or the recognition of international registration pursuant to an international treaty of which Vietnam is a member. The remaining being: (i) rights to trade name shall be established on the basis of lawful use thereof; (ii) rights to a trade secret shall be established on the basis of lawful acquirement of the trade secret and maintaining confidentiality thereof.

How are term and scope of protection of the right to an arising object on the basis of granting of a protection title?

Firstly, protection titles shall be valid throughout the entire territory of Vietnam. This provision means the validity of title is only territorial. It means titiles granted by any country will only take effect within its territory and are not accepted in other countries or other titles granted by Intellectual Property Office of Vietnam will take effect throughout the entire territory of Vietnam.

Secondly, regarding each industrial property object, validity of protection titles are different. Such as validity of the invention patent is 20 years from the grant date but the timeline to calculate until the end of 20 protection years is filing date. Regarding utility solution patent, the validity shall be 10 years and the calculation until the end of 10 years is same as calculation of invention patent. It should be noted that validity of invention patent and utility solution patent may not be extended. However, industrial design patent, certificate of registered mark may be extended. In particular: (i) industrial design patent shall be shall be valid from the grant date until the end of five years after the filing date and may be extended consecutively with each time of 5 years. Therefore, industrial design patent may be extended up to 15 years; (ii) certificate of registered mark shall be valid from the grant date until the end of ten years after the filing date. However, this object has a special feature that it is able to extend repeatedly and consecutively the validity with each time of 10 years. Therefore, this object may be extended validity forever.

Regarding certificate of registered geographical indication, it shall have indefinite validity starting from the grant date because of its characteristic of sign used to identify a product as originating from a specific region, locality, territory or country. Reputation of products bearing a geographical indication shall be determined by graphical conditions, including natural factors (climatic, hydrological, geological, topographical and ecological factors and other natural conditions); Human factors (skills and expertise of producers, and traditional production processes of localities…).

In addition, one of objects having specific validity is certificate of registered design of semi-conducting closed circuits. Certificate shall be valid from the grant date until the earliest date among the following: (i) the end of ten years after the filing date; (ii) the end of ten years after the date the layout design was first commercially exploited anywhere in the world by a persons with the registration right or his or her licensee; (iii) the end of fifteen years after the date of creation of the layout design.

Having said that, when the owner of industrial property object is granted protection title, it should be noted at time of expiration of title to apply for the extension in order to guarantee interests as well as benefits that industrial property objects brings.  The owner could contact IP department of ANT Lawyers and patent, trademark and other IP attorney in Vietnam will be assisting the client to review the matters and provide relevant advice.

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Distinguish Assignment of Industrial Property Rights And the Licensing of Industrial Property Rights

According to Law on Intellectual Property in Vietnam, industrial property rights means rights of an organization or individual to inventions, industrial designs, designs of semi-conducting closed circuits, trademarks, trade names and geographical indications, trade secrets which such organization or individual created or owns, and the right to prevent unfair competition.

Industrial design in Vietnam

Accordingly, these rights may be transferred to other organizations and individuals that are not creators or owners of those objects. Transfer of industrial property rights includes two types of “assignment of industrial property rights” and “licensing of industrial property rights”.

The assignment of industrial property rights means the transfer of ownership right by the owner of such industrial property right to another organization or individual. It means assignor shall have to transfer all the rights of the industrial property object to assignee and after the two parties complete the transfer procedure, assignee shall be fully entitled to make decisions upon that industrial property object. However, when transferring, the parties should pay attention to the following matters: (i) Industrial property right owners may only assign their rights within the scope of protection; (ii) Rights to geographical indications shall not be assignable because this object is physical and cannot be moved; (iii) Rights to trade names may only be assigned together with the transfer of the entire business establishment and business activities under such trade name for instance under merger and acquisitions; (iv) The assignment of the rights to marks must not cause confusion as to properties or origins of goods or services bearing such marks (v) Rights to marks may only be assigned to organizations or individuals who satisfy conditions for persons having the right to register such marks.

Licensing of industrial property objects means permission by the owner of such industrial property object for another organization or individual to use the industrial property object within the scope of the owner’s right. Unlike assignment, licensing of rights is when the owner of industrial property object temporarily grant rights to other organizations and individuals to use their industrial property objects for a definite period of time. Licensing of industrial property rights also has certain restrictions such as (i) The right to use geographical indications or trade names shall not be licensable; (ii) The right to use collective marks must not be licensed to organizations or individuals who are not members of the owners of such collective marks; (iii) The licensee must not enter into a sub-license contract with a third party unless allowed by the owner; (iv) Mark licensees shall be obliged to indicate on goods and goods packages that such goods have been manufactured under mark license contracts; (v) Invention licensees under exclusive contracts shall be obliged to use such inventions in the same manner as the invention owners.

Accordingly, the parties need to understand the purpose, scope and object of transfer of industrial property rights, and thereafter sign corresponding agreements being being assignment of industrial property rights or licensing of industrial propertyrights.  Copyright, trademark, patent lawyers could be of help to provide consultancy and legal advice to ensure the rights and obligations are clearly spelled out to avoid potential dispute in Vietnam during the transfer of industrial property rights.

If you are looking for an IP attorney, but are concerned about the typical costs associated with the traditional legal search, you should visit ANT Lawyers where we work to trim those costs. We will match you with an experienced IP attorney in Vietnam for a free, no obligation consultation.

Hope this helps!

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What is the advantages and the disadvantages of licensing contract?

Licensing of industrial property rights (Licensing) is one of the legal measures to transfer technology. In accordance with Law on Intellectual property in 2005 (amended, supplemented in 2009), licensing of an industrial property rights means permission by the owner of such industrial property object for another organization or individual to use the industrial property object within the scope of the owner's right. Licensing of industrial property rights must be established in the form of a written contract. There are three types of industrial property object licence contracts: Exclusive contract; Non-exclusive contract; Industrial property object sub-licence contract, detailing:

Industrial design in Vietnam

-Exclusive contract means a contract under which, within the licensing scope and term, the licensee shall have the exclusive right to use the licensed industrial property object while the licensor may not enter into any industrial property object licence contract with any third party and may use such industrial property object only with permission from the licensee.

-Non-exclusive contract means a contract under which, within the licensing scope and term, the licensor shall still have the right to use the industrial property object and to enter into a non-exclusive industrial property object licence contract with others.

-Industrial property object sub-licence contract means a contract under which the licensor is a licensee of the right to use such industrial property object pursuant to another contract.

What is the advantages and the disadvantages of licensing contract?

-Firstly, for licensor, licensing can be used to access new markets that are not easily accessible. By allowing the licensee the right to market and distribute the products, the licensor can more easily enter the market; Licensing contract may stipulate measures for the licensor has the right of improvements, technical know-how and related products that will be developed by the licensee during the valid term of the contract. However, the licensor may not always claim these rights, and some countries have strict restrictions on including these types of terms in the licensing contract; Licensing is necessary if the product only sells best when combined or sold for use with another product; Last but not least, the licensing contract allows the licensor to hold ownership of the intellectual property and at the same time receive licensing fees, in addition to the profits gained from self-exploitation of such assets from products or services sold or provided by that party.

Besides the advantages, the licensing contract also has some disadvantages for the licensor. The licensee may become a competitor of the licensor. The licensee may make the licensor make less remuneration than the business losses resulting from the competition of the new competitor; The licensee may unexpectedly request contributions, for example, for technical assistance, human resource training, additional technical data, etc. It is important that the licensing contract must clearly stipulate the rights and obligations of the parties, whereby any disagreements that occur in the future can be resolved quickly and effectively; The licensor's revenues depend on the skills, capabilities and resources of the licensee. This dependence is even greater in the case of exclusive licensing. The provisions of minimum wage and other provisions may be provided to avoid this, but this is still a concern.

-Secondly, for the licensee, the advantage of a licensing contract is allowing access to technology that has been developed or is available to apply for helping businesses access to the market more quicly; Small companies may not have the resources to do and carry out the research to supply new and higher quality products. The licensing contract allows enterprises access to technical advances that are difficult to achieve by other measures; Licensing may also be necessary to maintain and develop an established market position but be threatened by new designs or production methods. Access to new technology through a licensing contract is the best way to overcome this challenge; There may be many opportunities to get a license when combining with existing company technologies can create new products, services and opportunities in the new market.

-Regarding the disadvantage to the licensee, the licensee may have to make financial commitments to technology that is "not yet ready" for commercial exploitation, or need to modify the technology to meet its business needs; An intellectual property licensing contract may result in additional costs for the product. Many technologies integrated into products can create products with high technology content but are very expensive when publishing to market; Licensing may create technological dependence on suppliers, who may not extend the licensing contract and negotiate a licensing contract with other competitors to limit the market or to limit exploitation activities which was allowed in accordance with licensing contract.

If you are looking for an IP attorney, but are concerned about the typical costs associated with the traditional legal search, you should visit ANT Lawyers where we work to trim those costs. We will match you with an experienced IP attorney in Vietnam for a free, no obligation consultation. Hope this helps.

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