Many companies in the U.S. license the manufacturing of their products to companies in low cost jurisdictions in order to reduce production costs while maintaining their brand name and expanding their product reach.  Licensing is less expensive than setting up a manufacturing facility in a foreign country and can leverage the value of existing company brands.  In addition, licensing can make it possible for the company to increase distribution of its products and expand with little capital commitment, fewer dedicated company resources and little risk.However, licensing arrangements in China present significant issues that can put the company's brands at risk.  The headlines are rife with stories of products that are manufactured in China and have created health hazards for consumers.  These stories underscore the difficulty of policing the quality of the product supply chain and also the harm to the company's image in associating its brands with inferior products.  In addition, many U.S. companies have experienced initial success with licensing, only to discover that their licensee has been selling their products �out the back door� or has decided to set up a competing company.   Monitoring sales and royalty payments requires resources from the licensor that may not have been anticipated in the original economics of the licensing arrangement.  And finally, most companies find the costs associated with trying to enforce intellectual property and contractual rights in China to be significant and the results to be unsatisfactory. The presentation will focus on how companies assess the risks and rewards of licensing arrangements, common payment provision, common control and monitoring mechanisms and best practices for enforcing licensing arrangements.

Licensing agreements and protection of the company jewels: Can you afford to license your technology?

246th National Meeting (2013)

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