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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).

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. It might also be a solution where you do not carry out any manufacture of the products concerned, or you do not wish to continue to do so, and you instead wish to leave that to others.

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.

See under "Related Documents" below.

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