The Fee Paid To A Firm In A Licensing Agreement

An international licensing agreement allows foreign companies, either exclusively or exclusively, to produce an owner`s product in a specified market for a specified period of time. You invented something, he received a positive evaluation and filed a patent. Or maybe your company doesn`t have the capital or know-how to manufacture and market its product in a global market. Inventors often prefer to license their technology rather than try to manufacture and market them themselves. Similarly, licensing may be the only practical way for a company to maximize the potential of its existing products. The benefits of licensing can be viewed from two angles: licensees and licensees. In a typical licensing agreement, the licensee undertakes to make intellectual property rights such as technology, brand name or licensee know-how available to the licensee. In exchange for the intellectual property of the licensee, the purchaser usually plays the donor a pre-feeding and/or a licence fee. A licence fee is an ongoing fee paid for the licensee`s right to use intellectual property. In May 2018, Nestlé and Starbucks entered into a $7.15 billion coffee licensing agreement.

Nestlé (the licensee) has agreed to pay $7.15 billion in cash to Starbucks (the licensee) for exclusive rights to sell Starbucks products (single serving coffee, teas, beans, etc.) through Nestlé`s worldwide distribution network. In addition, Starbucks receives royalties from coffees and packaged teas sold by Nestlé. It is difficult to set an acceptable royalty rate for a product because there is no rapid fixing percentage that can be used as a general measure. Although rates ranging from 3% to 8% of net sales are common, each licensing agreement is unique and the only important consensus on royalties is that between the licensee and the taker as a result of negotiations. This is very attractive to companies that are new to international business. On the other hand, international licensing is a mode of entry abroad that has certain drawbacks and reasons why companies should not use it, because there is: a licensing agreement is a contract between two parties (the licensee and the licensee) in which the licensee gives the licensee the right to use the mark, the mark, the patented technology or the ability to manufacture and sell goods in possession of the licensee. In other words, a licensing agreement gives the licensee the opportunity to use the licensee`s intellectual property. Licensing agreements are often used by the licensee to market their intellectual property.

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