Routes to market:Using licensing as a route into a new export market
What you’ll learn
- what licensing is
- the pros and cons of using licensing
- how to decide whether it’s right for your business
What licensing means for your exports
Licensing means giving a third party the right to make and sell your product, service, or intellectual property (IP) in a particular market, in return for a payment.
The main intellectual property rights (IPR) include:
- copyright
- patents
- trademarks
- designs
The payment, or royalty you receive, depends on how much of the product, service, or IP is sold. You would be the licensor, and the business making or selling would be the licensee.
If you’re a new business, it is usually not recommended to start selling with a licensing model. For instance, if you rely on your brand story to sell, you may not want to give up control of this before you’re well established.
In some instances, licensing can be a cost-effective way to expand into a new market quickly without having to sell to customers directly: for instance, if you’re selling IT software – where branding may not be a priority. But you’ll still need to make sure your designs and ideas – your IP – are protected in the new market.
Pros
- Return on investment without the effort of selling
- You gain the licensee’s market knowledge and experience
- You save on logistical costs
- You keep control of your product design and IP rights
Cons
- Less control over your brand story
- Costs for legal and administrative work
- Discussions on responsibilities and royalty payments can take time and be complex
If you think this route may be right for you, please be aware it can be complex. It’s important to research thoroughly, using sources like the Intellectual Property Office website, and consult with experts who can advise you on the legal implications and trade details.
International trade adviser
Take legal advice
If you choose to use licensing, a specialist lawyer can give you advice and help draw up the licensing agreement. Some of the things you’ll need to consider are:
- the type of license – will it be exclusive or limited by territory?
- the duration of the license agreement
- circumstances where the license can be terminated early
- how royalties will be paid
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