For a country best known in world trade for exporting minerals, raw materials and Agricultural produce but Australia has a rich and often hidden history as an international licensor of technology, innovation and production processes to the world.
These successes cover a wide range of processes and technologies from metal roll forming (Roll-a Door), insulation processing through to hi-tech medical products (Cochlear) and more recently a range of programming technology for the computer and machinery control market.
Many companies dream of licensing unique technology that they have developed but cannot cross the threshold of stepping out into the marketplace and offering their technology widely to world markets. There is doubt and uncertainty and the fear of the unknown and the potential risks that seem evident.
What then are the essential elements that allow a company to undertake a successful international licensing program? Case studies suggest the following are required to embark on a successful international licensing campaign:
- A fundamental product with either unique technical features that serves market needs.
- A Trademark that can be licensed and therefore valued
- Technical and marketing support for the product.
- On-going technical development of the product
- Capacity to expand the sales area.
- A good set of literature and product catalogues that can be utilized in any market
- On-going sales support and regular meetings
Some companies will not have all of the above but it is possible to add the above skill sets as licensing activities are undertaken. However, unless all are acquired during the licensing program the program will soon flag and faulter.
After establishing that a Licensing program is feasible what are the issues that need to be addressed? Simply listed these headlines are to identify and detail:
Target Markets – Initially preferably close to the ‘home market’ and with an understandable accounting and legal system.
Territory – Normally limited to one political area or country. Sometimes the territory may cover several countries if the target market is small and there is commonalities.
Terms – A License agreement is normally for either a 3, 5 or10 year term.
Price – Normally a license will attract a fee either based on turnover or a fee for unit produced or sold. Either approach is used to facilitate an easily assessed audit of the License fee due. A minimum license can also be agreed thus facilitating a n underwriting of the licensee support. It is not uncommon for an ‘’upfront’’ fee to be paid for facilitating the purchase of the license.
Legal Agreement – The terms of the Agreement can be extensive and varied and detail the obligations of both parties. Standard agreements are readily available as templates.
Minimising the risk of licensing
In establishing a Licensing activity, the greatest risk is to commence without a clear and written vision of the aims, objectives and mileposts of the activity. The most common errors that new Licensor commit are:
- Not have available a ‘’Technical Package’’ and an index of the technology to be transferred to the Licensee.
- To under price the value of their technology by failing to understand the true financial benefit to the Licensee.
- To offer too large a license territory either by client base or geographic region
- Over stretch the technology to new applications that are not fully developed.
- Not have a development program in place seeking out the next step forward in the technology path
- Failing to have one’s Trademark registered
And failing to support the Licensee in the early stages of the License Agreement.
Why License and what are the benefits of licensing one’s technology?
If undertaken properly Licensing is a low-cost market entry with a guaranteed income stream for a successful product. It enables small companies to establish a market presence without local or regional investment (apart from licensee support) and without local employment obligations.
Licensing multiplies the skill set of a small enterprise to a significant level and allows international expansion opportunities to be maximised.
Export income is earned and with relatively low cost the home market can be strengthened whilst ‘adding value’’ to in-house technology valuations.
Isowall Consulting has extensive Licensing experience out of Australia and can provide advice to Australian Companies seeking to develop and license their technical developments.