International licensing agreements make the business world go round
On March 31, 2015, Perry Ellis International (PEI) announced the extension of its license agreement with Nike, Inc. PEI will continue to design, produce, manufacture and distribute swimwear products in North America and certain countries in Europe, Central and South America.
Oscar Feldenkreis, President and Chief Operating Officer of PEI stated, “We are extremely pleased and proud to announce our continued partnership with Nike which commenced in 2003. The extension of our license provides us with a platform for long-term growth with one of the world’s most recognized brands and is consistent with our strategic initiatives to expand our international footprint.”
This agreement illustrates the importance of intellectual property licensing agreements as commerce is increasingly globalized. Such licensing agreements must be carefully crafted to protect the property being licensed now and in the future. And as discussed below, additional steps may need to be taken to protect one’s intellectual property in the countries where one’s products will be sold.
A licensing agreement controls the right to use intellectual property, meaning intangible things of value like branding, creative works, inventions, production methods and so on. Valuable intellectual property ownership rights are protected mainly by patents, copyrights and trademarks. Huge amounts of money depend on solid and comprehensive licensing agreements that put intellectual property into commercial deals.
The owner of intellectual property like a patent is called the licensor; the party who purchases the right to use the property is the licensee. Payment under such a contract is usually made in a lump sum, in periodic payments or via royalties (payments often in proportion to sales or the number of items produced using the intellectual property).
Purposes of international licensing agreements include:
- To grant the right to a foreign company to manufacture, distribute or sell a protected product
- To grant the right to a foreign company to use a protected brand
- To grant the right to use in another country a protected process like one used in manufacturing
- To grant the right to use a protected invention like a part or component within a larger product
- And many more
When an international licensing agreement is created, it is also vitally important that the intellectual property ownership rights are protected in the countries in which they will be used or sold. For example, the object of a valid U.S. patent is not automatically protected in another country, so the patent must be obtained in that country either according to the law and procedure of that nation or through the registration procedures of WIPO, the World Intellectual Property Organization.
Part of the United Nations, WIPO is an agency with almost 200 member countries that provides international intellectual property registration services as well as intellectual property dispute resolution services. Through WIPO, an application for registration or protection can be processed in chosen countries or in the countries in a certain region.
Experienced legal counsel essential
It is imperative that the intellectual property owner seeking to license it abroad find an intellectual property attorney with international experience. Knowledgeable legal counsel is also crucial for potential licensees.
The attorney will either draft the licensing agreement to facilitate the goals of the deal or review an agreement drafted by another lawyer. The attorney must consider all details of the contract, including those concerning the parties’ rights and duties, to protect the client in all legal matters, including compliance with U.S. and foreign laws as well as treaties.
Legal counsel will also discern whether all patents, copyrights and trademarks are in place to protect intellectual property at home and abroad.
From our offices in Newport Beach, California, and through our strategic partnership with Dacheng Law Office in Beijing, China, the international business attorneys at WHGC, P.L.C., represent clients seeking intellectual property services locally, statewide, nationally and globally.