What is Licensing?

Licensing is one of the most popular methods of the business leveraging strategies after Franchising. In general, Licensing is a permission given by the licensor to authorize the licensee the legal rights to use the brand name, logo, product, technology, inventions and/or works of expression for commercial purposes, sparing the licensee from a claim of infringement brought by the licensor.

What are the benefits of Licensing for Licensors?

There are many benefits, among others are:

  • increase the brand presence at retail or distribution outlet
  • create further brand awareness to support the core products or services
  • support and enhance the core values by associations with the licensed products/service or category (e.g. association with a healthy food product)
  • enter new markets (consumer or geographical) which were unfeasible via its own resources or capabilities
  • generate new revenue streams, with little involvement or additional financial or other resource implications

What are the benefits of Licensing for Licensees?

The benefit for a Licensee (especially manufacturer or retailer) is the ability to significantly increase consumer interest in and sales of its products or services.

Licensing can:

  • transfer the values and consumer favor towards the property to the licensed product or service
  • provide added value and differentiation from competitive offerings
  • provide additional marketing support or momentum from the core property’s activity provided by the licensor
  • appeal to new target markets who have not historically been interested in a licensee’s product or service
  • give credibility for moving into new market sectors through product extension
  • gain additional retail space and favor

Is the licensor required to register his licensing with the government of Malaysia?

No, so far there is no such provision of law required the licensor to do so in Malaysia.

Can I license my idea without registering my Intellectual Property (IP) rights?

Ideas can be copied unless they are either covered by some form of IP rights or if the person who has received the information in confidence. If you want to license an idea it is advisable to be covered by certain form of intellectual property right such as patent rights or trade mark registration or alternatively the idea must have been received by the intended purchaser in confidence. It is usually difficult to get a potential purchaser to agree to receive information in confidence from a stranger and therefore in practice it is usual to file for some form of intellectual property protection.

What is the difference between a Franchising and Licensing?

The Franchisee buys a total business package from the Franchisor, which allows him to operate the business wherein the franchisor will train and provide regular support services to the franchise. Whereas for licensing, there is less need for a common standard amongst all licenses of the same licensor.

How long does a license agreement usually last for?

Duration of licensing agreement is flexible, usually, less than five years, as opposed to the Franchise agreement where the Franchise term, shall not be less than five years pursuant to Section 25 of the Franchise Act 1998.

What sort of terms and conditions are usually included in a license agreement?

Generally, it contains what is being licensed (product technology, trade or service marks), territory granted, the duration of license, type of license (whether the license is exclusive or not), accounting provisions, license fee and royalties need to be paid, role and responsibility, termination clause and so on.

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