International license: Overview, definition, and example
What is an international license?
An international license is an agreement that grants one party the rights to use, distribute, or exploit intellectual property (IP), such as patents, trademarks, copyrights, or technology, in multiple countries or regions outside the country where the IP owner is based. The license can cover various forms of IP use, including manufacturing, marketing, or selling goods, and can be tailored to specific territories, time frames, and conditions. International licenses are commonly used by businesses that want to expand their reach into foreign markets without directly operating in those regions.
For example, a software company based in the United States may grant an international license to a distributor in Europe to sell and promote its software in European countries.
Why is an international license important?
An international license is important because it enables businesses to expand their intellectual property use globally without having to manage operations directly in multiple countries. It also allows the IP owner to generate revenue from foreign markets, while the licensee gains the rights to sell or distribute the product within specific regions. These agreements can help increase market penetration, establish brand presence in new territories, and grow revenue streams while managing legal and financial risks.
Understanding international license through an example
Imagine a U.S.-based company that owns the patent for a new medical device. Instead of setting up operations in every country around the world, the company enters into an international licensing agreement with a distributor in Asia. The agreement gives the distributor the right to manufacture, sell, and market the device in selected countries across the continent. The U.S. company receives royalties from sales, while the distributor manages local operations, reducing the U.S. company’s costs and risks associated with foreign expansion.
In another example, a global fashion brand enters into an international licensing agreement with a local company in South America. The local company is given the exclusive right to manufacture and sell the fashion brand’s clothing and accessories within the South American market. In return, the fashion brand earns royalties from sales in this region.
An example of an international license clause
Here’s how a clause related to an international license might appear in a contract:
“The Licensor hereby grants the Licensee an exclusive, non-transferable, and sublicensable license to distribute the Licensed Product in the territory of [specified countries/regions] for a period of [specified time], subject to the terms and conditions set forth in this Agreement. The Licensee agrees to pay the Licensor a royalty of [specified amount or percentage] of the net sales from the Licensed Product sold in the designated territory.”
Conclusion
An international license allows businesses to extend the reach of their intellectual property globally, providing both the owner and the licensee with new opportunities for growth and revenue. By entering into an international license agreement, companies can enter foreign markets more efficiently, reduce operational risks, and generate income from regions where they may not have the resources or desire to operate directly. Clear terms and conditions in the license agreement are essential to ensure that both parties understand their rights, obligations, and limitations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.