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.
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.