IP As Property / IP Rights Licensing / International Licensing

Fifteen or even ten years ago this section would have been the longest part of this paper. Many countries around the world had limitations on the way in which license agreements could be drafted, for example, imposing maximum royalties prohibiting bars on export sales or demanding that all disputes relating to the contract be settled in their own country. For the most part these have now gone, although several countries still require that all intellectual property license agreements be recorded with their national authorities. Even Brazil, which was notorious for its policy in this area repealed most of its legislation earlier this year. However, care does still need to be taken in many countries and the current status of technology transfer regulations in any country which is covered by an agreement which one intends to make should be checked carefully before entering into a contract.

For example, although in Argentina there is no requirement to obtain any governmental approval in respect of a technology transfer license between companies operating at arm's length, if the companies are related in any way approval is still required. That approval furthermore will only be granted if the royalty provisions contained in the agreement are consistent with those which would pertain between parties negotiating at arms length. In India although approval is automatic in some cases, it is still required. In order to qualify for automatic approval it is necessary that the royalty rates imposed be no more than 5% on domestic sales and 8% on export sales. Similar restrictions are imposed on lump sum payments and in this case it may be required that the final third of any lump sum payment be delayed until production under the agreement commences. There are also problems in imposing minimum royalty rates unless these are tied to a particular production target. In Korea, although most limitations on intellectual property rights licensing have been abolished in recent years, there still remains a prohibition on charging royalties for a trademark license unless the licensor provides technical assistance to the licensee. In countries which form part of the Andean Pact some other restrictions remain in effect, for example, prohibitions on a requirement to pay royalty on unused technology, restrictions on the volume or structure of production or prohibitions on the use of competing technologies. Additionally, prohibitions exist on matters dealt with by antitrust laws in other countries such as, requiring the licensee to purchase particular goods from the licensor or some designated source or to assign back to the licensor any improvements made by the licensee.

One final point to bear in mind in this area is that where limitations of the type discussed above do exist, this can have an impact on agreements if such agreements contain a most favored nation clause. If such clauses are included in international license agreements, the exact wording used needs careful consideration.