Licensing is a contractual arrangement where a licensor allows a licensee to use their technology, patents, trademarks, designs, processes, know-how, or intellectual property for a fee. It differs from a government license. Franchising is a type of licensing where the licensor licenses a complete business plan to the licensee while maintaining control over standards. Reasons for licensing from the licensor's perspective include lacking resources to directly exploit a market, testing a new market, monetizing an invention, addressing small market sizes, and avoiding political risks. However, licensors must be cautious of licensees becoming competitors or further developing the technology. The licensee benefits from getting access to intellectual property quickly, cheaply, and

1. Licensing:
A strategy for technology transfer.
A contractual arrangement whereby the licensor (selling firm) allows the licensee
(the buying firm) to use its - technology
- patents
-trademarks
- designs
- processes
- know-how
- intellectual property
for a fee.
Note that this is not the same kind of licensing as for example when a government
issues a license or gives permission for a bank to open a branch, or a firm to
manufacture a particular product, or to explore for gold or oil

2. Franchising is a particular kind of licensing, where basically
you license a complete business plan
and maintain control over - standards of service
- quality
- product design
- pricing
- packaging
- promotion
- production techniques & stds
- organization & control system

3. Reasons for Licensing - Exporters (sellers) Point of View
1. Lack capital, management resources, market knowledge to exploit directly by
export or FDI, so license to a local firm
2. Use licensing as a way to test the market (but is this unfair to local licensee?)
3. We can get money for an invention or technology which is outside our core
competence
4. Local market may be too small - problem of economies of scale
5. Avoid or minimize political factors/risks
- restrictions on imports
- restrictions on FDI
- require majority foreign ownership
- high risk of nationalization
6. Possible high rate of obsolescence / short product life cycle for new technology -
maximize scope for exploitation

4. Caution:
1. Will the licensee become a competitor?
2. What about the licensee possibly developing the technology even further
himself?
If a trademark or brand
3. Will the licensee protect image/quality/service standards?
e.g. Zimbabwe garment factory and van Heusen shirts
e.g. Pierre Cardin menswear in Canada, Africa, England
## May be necessary for licensee to monitor the output ##

5. Advantages for Licensee (buyer)
1. Quick
2. Cheap
3. Low risk
Gets marketing advantages - brand image, promotion
Problems for Licensor
1. What rate to charge?
2. Does that maximize profits?
3. What about getting feedback from customers on uses?
4. What about getting feedback from customers on improving the technology?
5. Lose control over use of the product
- sales into what markets?
- what about sub-licensing?
- how to monitor conformity to terms of license?
- how to monitor maintaining quality standards?

6. Debate Over Intellectual Property Rights
- Patents - things and processes - 17 years
- Copyright - words and pictures - Lifetime of author + 70 years
Question: Is software to be protected by patents - it can be embedded in a chip
or by copyright - it can exist as freestanding
written lines of code.
Against For
Monopolistic
- high cost
- slows adoption
Discriminates against LDC’s
(especially medical)
- can’t afford it
- Reward for entrepreneurship
- Recover cost of doing it
- Stimulus to R & D
General appeal to property rights
being fundamental to a free enterprise
society

7. The Third World tends to have weak to non-existent intellectual property
laws - because it’s to their advantage.
A big bone of contention, especially with the United States, and also in
negotiating free trade under WTO
On the other hand, has US patent law gone too far? They sometimes seem
to be granting patents on extremely general “catch-all” kinds of propositions,
or things which other countries regard as non-patentable
Should companies be able to patent DNA sequences?
The human genome?
Does that mean some company without my knowledge or permission
could in effect patent me?
Is patent law in effect acting as a barrier to the development of knowledge?

8. Major Elements of a License Agreement
I won’t go into details - that is a matter for lawyers
1. Always get yourself a good lawyer from the other jurisdiction
2. Specify what law (and language) governs
3. Specify how disputes will be resolved -which courts
4. Consider using arbitration rather than courts
e.g. Islamic Sharia courts threw out a number of contracts because they
included interest payments. Interest is “ haram” and the contracts were
therefore “unconscionable contracts”.
## Know who you are dealing with ##
- Trust between the parties is better than 50 pages of boiler plate.