For all companies that sell their expertise and products/services abroad or have partners in foreign countries.
1. License agreements, franchise agreements, SAAS, EULA
2. Distribution, reseller, and agency agreements, contracts for the use of copyrights and other intellectual property rights, production and supply contracts
3. Joint venture agreements, development agreements
4. Consortium agreements
CONTRACTS THAT DISTINGUISH LOSERS FROM WINNERS: DO YOU KNOW HOW TO ENTER A FOREIGN MARKET?
Globalization has enabled companies to expand their operations into other countries, enter attractive new markets, reduce costs, or acquire special skills and experiences. Cross-border transactions, mergers, and acquisitions (M&A) have become an essential tool for companies becoming multinational. International business offers numerous advantages, but severe losses can occur if appropriate measures to protect the interests of the company are not taken. What contracts can ensure a company’s worry-free and successful collaboration abroad?
Before discussing international contracts, it is necessary to emphasize that every initial step into foreign markets begins with appropriate (international) protection of intellectual property (registration of patents, protection of expertise, registration of trademarks, etc.). Inadequate protection can lead to loss of revenue, reputation, and competitive advantage and determines which companies will return home defeated. Planning expansion into a foreign market must initially include a clear definition of which trademarks, patents, models, designs, copyrights belong to your company and which products or services you intend to export abroad or how you might profit from your intellectual property rights.
1. INTERNATIONAL LICENSES
Assume that European Company A, a manufacturer and seller of automobiles, wants to expand into the Chinese market. It expands into the Chinese market with an international business license. It signs a contract with a Chinese company allowing the Chinese company to use its patent in exchange for payment.
Licensing intellectual property is a common method by which companies enter new markets. Although licenses offer many advantages, it is necessary to identify potential complications and ensure that the agreement is suitable for both the issuer and the recipient of the license. For a license agreement to be truly effective, it is necessary first to determine what type of intellectual property is being licensed and to appropriately adjust the license. When drafting a license agreement, the different wishes and interests of the parties can also be considered.
Licensing is a business arrangement in which one company allows another company to produce its product for a specific payment. Licensing is defined as permission that the licensor grants the licensee to use intellectual property rights, such as trademarks, patents, trademarks, or technology, under certain conditions. Under the license agreement, the multinational company grants rights of its intellectual property to a foreign company for a specified period. The licensor typically receives a royalty for each unit produced and sold. Although the multinational company usually does not have ownership stakes, it often provides ongoing support and advice. Most companies consider this licensing option for market entry a low-risk opportunity, as there is usually no initial investment required.
2. CONFIDENTIALITY AGREEMENT
Confidentiality agreements or non-disclosure agreements (NDAs) are legally binding contracts that set the conditions under which one party may/may not disclose confidential information to another party. Protecting confidentiality can be binding only for one party (in this case, the agreement is unilateral) or for both parties (bilateral agreement).
Entering into a non-disclosure agreement protects a company’s competitive edge. If a competitive company acquires information about innovative ideas, processes, new company projects, and uses new products or ideas for its product, the company loses years of developing its innovative ideas, which made the company successful and recognizable in the first place.
Cross-border data protection agreements are complex and detailed documents – especially when the agreement protects the use and transfer of sensitive information across borders. Decisions on applicable law, jurisdiction, potential damages, and clear definitions of breach can reduce uncertainty and shorten the time and money spent resolving disputes.
It is also sensible to include a non-compete clause that defines the relationship of employees or business partners who access confidential information. These agreements specify the period after the end of an employment contract during which a former employee or business partner must refrain from working for a competitor.
3. DISTRIBUTION AGREEMENT AND MANUFACTURING AGREEMENT
This is an agreement between a product supplier intended for sale and another company that markets and sells the products. The distributor agrees to purchase products from the supplier’s company and sell them to customers in specified geographic areas.
Many companies forget that a manufacturing agreement is essentially a license for intellectual property. It is practically impossible for the manufacturer not to generate intellectual property. For instance, a manufacturer might create tools and processes needed to manufacture Company A’s product. The tool thus becomes intellectual property. If Company A wants to transfer the tool to another manufacturer or later design the same tool, it must obtain ownership of that tool.
The manufacturer obtains all the information necessary for production: plans, schematics, instructions. Plans, schematics, instructions are all forms of intellectual property. Access to such information allows the manufacturer to misuse the information and produce unauthorized copies, which can also occur after the collaboration ends. Such scenarios are addressed in the appropriate contractual relationship.
International business involves numerous risks, especially for small and medium-sized enterprises. INNO Legal Ltd. can help you at the start, in designing a crucial strategy and throughout the process of collaborating with new partners. TO ENSURE YOUR COMPETITIVE ADVANTAGE REALLY REMAINS YOURS!
