Licensing Agreement - Report Example

Licensing Agreement Licensing Agreement Executive summary Creativity has taken up most of the industries in the world. Creation of new products in the industries has also been on the increase as people try to beat other competitors in the same market. The world’s greatest companies rely on the creativity of their employees to ensure that the goods, which are introduced, into the market are well received and meet the companies’ objectives thus bringing positive returns. For a product to be availed in the market there needs to be the creation and execution of an idea. This is considered to be the first step of intellectual property. This report will identify issues that Alarmz ltd might face by entering into an agreement with a Brazilian company and how identified problems might be overcome. Introduction Alarmz Ltd is a company that prides itself with the use of technologically updated car alarms five years running. We deliver and fit the top brands in car alarms including Clifford, Cobra, Hornet, Viper, Avital, Laserline and Autowatch and all forms of car alarm, parking sensors, audio, hid lighting etc. We also fit car accessories at amazingly low prices. Our specialty includes remote start and 2way car alarms and our clients are guaranteed excellent results. With the increase in car thefts and faulty vehicle tracking devices, there is a need to ensure that cars have well manufactured and functioning alarms. This has led to our company, Alarmz Ltd to create ideas for the manufacture of a new tamper proof alarm. This alarm will be designed in a way that minimizes chances of tampering by people who have malicious intentions with the car. This alarm system will have features that will be different from other market alarms. In this quest, we were able to identify the Brazilian Company Redfern Integrated Optics (RIO) Inc as our preferred manufacturer. RIO Inc. is a company that is well known for the manufacture and development of optical and subsystems based on Planar External Cavity Laser Technology (PLANEX). It distributes exclusive price-performance returns in energy, security, infrastructure, metrology, and other markets. The qualities of products produced by RIO Inc are the best so far in the market. Cases of dissatisfaction by customers have been minimal. The distribution of their products is on a wide area scale, as they have adequate transportation that oversees distribution. This is therefore, the better option we have identified to work with as a manufacturing company. There is a need for Alarmz Ltd to enter into a licensing agreement with RIO Inc. A licensing agreement is necessary because, our company needs to protect its intellectual and invention rights. Since our company came up with an idea and wants to make the product a reality, we still need to have rights over the product as the inventors. Alarmz ltd will need to increase its revenue, and the product can do that. Making a licensing agreement ensures that Alarmz ltd; the original inventors of the product enjoy the benefits of the product and are involved when an increase of price for the product is needed. A licensing agreement will enable our company to increase visibility and access to our product under a trademark with RIO Inc. A licensing agreement will enable the product to bring attention to our company. This is an intellectual property that can become symbolic, when shared and used in the right way. Alarmz ltd needs to be careful in entering a licensing agreement and adequate research should be done before with adequate legal guidance. The agreement is contractual between Alarmz ltd and RIO Inc., or any other company that we may choose to do business. In this agreement, RIO Inc. can exploit our product, process and manufacture it, but obliged to pay us royalty from the sale of the product. The licensing agreements will give Alarmz ltd enjoyment of benefits that will be achieved by the production and sale of the alarm. In creating a licensing agreement, we will give limitations to RIO Inc, who is not the originators of the alarm. These limitations are indispensable as RIO Inc may want to overshadow us and enjoy worldwide recognition because of the product. Buying of licenses enables licensors to make money for creations or products, by charging the purchaser or licensee for using the product. Advantages and disadvantages of a licensing agreement Development of a licensing agreement is of grave benefit to our company. It ensures that our rights as the originators of the tamper proof alarm are protected. Other benefits of the licensing agreement will be the reduction of costs for the production and sale of the product. Since we do not have our own manufacturing and marketing company, and the creation of our own company to undertake those tasks will incur a lot of time, expertise and resources, entering into a licensing agreement with RIO Inc. seems to be a cost cutting move. Since RIO Inc. has the ready facilities to undertake production and distribution of our product, we move from product development to an income stream. This will be as a result of obtaining royalties from them in the sale of our product. RIO Inc. will also benefit from our license agreement. They do not have to spend unpredictable funds to develop the product, which will or will not be received in the market well. They minimize their risk by licensing a saleable product where a portion of their costs depends exclusively upon sales. They only need to publicize it into their marketing network and instigate a flow of profits without having to spend time on examination and development. Managing the periodic or recurring runs of our products will impact RIO Inc.’s efficiency and prosperity. Working with RIO Inc. will eliminate non-core products from creation. RIO Inc. is a manufacturing company that is well known in its country. It is seen as one of the leading manufacturers in Brazil and has a high customer base due to the quality of its products. Working with them will enable our product to be well received in the market. It will also enable our product to be a trusted brand while still increasing our companies spread in Brazil. When we sign a licensing agreement with RIO Inc, devoted resources such as registries and tools will be shared to maintain active control by our company, over the product. This enables our company to give more concentration to our material and financial assets on the creation of a new product. With roles of, manufacturing and marketing lying with RIO Inc. our company will enjoy the benefits that will be received without a lot of participation in the sale. Licensing agreements are not all beneficial and needs close monitoring to ensure that the signed agreement is not tampered. Some of the risks we might face with a licensing agreement are unclear restrictions and conditions to the marketing, advertising and sale of the product. In this case there is need to agree on how these strategies will be implemented and once the product has been well accepted into the market, we will need to revise the terms and conditions of the contract. RIO Inc may not know or understand our product and they may easily misrepresent it. Some conditions that are stipulated in the agreement may hinder the process of advertising and marketing of the product, thus minimizing profitability of the product. RIO Inc. may believe that the product needs improving. Since we may limit their authority over our product, they will have minimal leverage on their license. This may result to an adversarial relationship between our company and RIO Inc. In the worst case scenario a lawsuit may be filed against us or against RIO Inc. Types of intellectual property protection The works that are protected under the intellectual property rights include works of authors, designers and other inventors from being pirated by others. Intellectual property rights contain four categories which include patents, copyright, trademarks and trade secrets. Each of these categories is different from the other in the following ways. Patents are rights that exclude people from doing what has not been agreed upon by itself, it cannot fully avail rights to apply the invention. In some cases there are people who hold patents cannot apply them without having a valid license. Works that are patented include new developments, compositions, machine and even new articles. Copyright covers works of authorship including music, literary and dramatic works, writings and works of art tangibly expressed such as audiovisual works. Copyright give owners the right to distribute all produced works which may also be translations. Just like a patent, a copyright is also a property and therefore can be sold and licensed. Trademarks are words, group of works and logo that are used in relation to the sale of products to differentiate them from other similar products sold by other people. With the use of a mark on its product, owners can exclude other people from using a similar mark on their products, in a manner that can confuse users of the product. Trademarks enable buyers to purchase goods produced by companies that they trust (Pitts & David 2000). A trade secret is information that is valuable commercially and is not widely recognized. Trade secrets include business techniques, procedures, formulas, machines and blueprints kept secret from business competitors. These secrets are acquired on the development of information or ideas and remains protected under statutory provisions. Many businesses suffer due to exposure of their trade secrets by competitors who may liaise with company employees. Establishing Joint Ventures This is a crucial practice in the Brazilian market. This helps foreign companies to participate in government segments and other markets focused on government regulations. Establishing joint ventures is beneficial as it opens doors for market entry, technology sharing and joint development of products, sharing of risks and benefits and being compliant to the country’s government regulations. Other benefits that may be gotten from the joint ventures are political bonds and access to distribution channels that depend on these connections. Joint ventures are extremely helpful for new market entrants but there are problems that are associated with them. There may be conflicts due to asymmetric new investments as different companies will want to invest. Performance uncertainty as people will always want to have the larger share of the pie regardless to the fact that their contribution was minimal (Frank 2004). Cultural clashes, due to companies from different cultural backgrounds wanting to merge. In respect to this, a culture that will be accepted in one region may not necessarily be accepted in another. Our company should therefore be careful when entering into such an agreement. Licensing can also be another factor that can determine how soon a new product can enter into a market. One of the issues we will need to address is the protection of our companies’ intellectual property rights, since in Brazil these rights are insufficient and vague. In dealing with Brazil, our company needs to monitor our trademark rights, agents, licensees, distributors and in some cases purchasers. Monitoring our trademark will enable us to discredit false trademark applications (Bradbury 2002). Exporting is marketing and direct sale of goods produced in one country to another. Exporting is the world’s traditional method of accessing foreign markets. Foreign direct investment (FDI) is has direct ownership of facilities in foreign countries. It involves relocation of resources such as funds, technology and workers. Organizations that assist in international trade Some of the organizations that can help us in the licensing agreement are; UK trade and investment team (UKTI) which is a governmental organization committed to helping companies achieve international business potential, by combining expertise from local international trade advisers with resources from Department of business, Enterprise and Regulatory reform and Foreign and commonwealth offices (Bradbury 2002). UKTI has a well of information and contacts about international trade which it avails to its clients. Through UKTI, Overseas Market Introduction Service (OMIS) allows exporters to request a variety of information about certain markets. UKTI also heads an event and training workshop all through the year. UKTI also supports trade exhibitions where exporters have the privilege to travel around the world and attend trade shows. This helps increase their knowledge of which industries are doing well in particular countries and the requirements for investors to join those markets (Frank 2004). Other organizations which may be beneficial are: the European Information service centre (EISC), Business Link South East, Portsmouth & South East Hampshire Chamber of Commerce, South Coast International Trade Forum (SCITF), World Bank, International Monetary Fund (IMF) and World Trade Organization. Having access to international trade is vital to ensure that working with international clients is smooth. With the information availed in this report, I believe that it will be of assistance in the decision to enter into a licensing agreement. References Bradbury, D 2002, ‘Breaking the Licensing Mould: Software Licensing Models Have Gone Through Some Changes in Recent Years, but None Are as Controversial as Microsofts Latest Initiative’, MicroScope vol. 32, no. 3. Ferraro, NP 2004, ‘Poetic License?’ Caveats for Buying or Selling Technology: A Well-Crafted License Agreement Helps Maximize Financial and Technological Profits and Reduce Risk’, Contract Management vol. 44, no. 7. Frank, GA 2004, ‘Licensing IP Rights: Why, How, What, and When—A Corporate Perspective’, Licensing Journal vol. 24, no. 6, pp 153-172. OHaver, RR 2003, ‘Management Intangibles: Capitalizing on Your IP Assets’, Journal of Internet Law vol. 7, no. 6, pp. 485-495. Pitts, RA & David, L 2000, Strategic management: building and sustaining competitive advantage, 2nd ed., South-Western College Publishing, Cincinnati. 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