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Selling: Manufacturing Licences

Manufacturing Licences

If you are looking to enter an overseas market reasonably quickly and cost-effectively you may consider entering into a manufacturing licence or other form of joint venture with a local partner. Such arrangements may vary significantly in legal form and content but generally involve the grant of licences under your intellectual property rights (IPRs).

Manufacturing Licence

A licence to manufacture will normally be appropriate where local manufacture will reduce costs or where it is impracticable to ship finished goods from your home base. Such a relationship may well develop from a distributorship.

A manufacturing licence agreement may well contain the following terms:

  • Whether the licence is exclusive;
  • materials, prices and payment terms;
  • your obligations for delivery, quality of materials and support;
  • the licensee's obligations as to forecasting and placing orders; stockholding, quality of finished goods;
  • the licensee's minimum purchase obligations and other performance criteria;
  • confidentiality obligations and restrictions on dealing with competitors;
  • termination provisions and the parties' rights and obligations on termination.

In addition, the technology transferred will involve the licensing of IPRs and the payment of royalties.

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