By Dan Harris
- Approved products
- Royalty payments. The amount of the royalty and the method for calculating it are usually the main issues. If the royalty is based on per unit sales, it is often difficult to determine the number of units sold.
- Payment terms. This is usually on an annual or semi-annual basis. The payment process from China is cumbersome and because of this monthly payment systems are almost never used. To cover risk, some licensors require an annual payment in advance.
- Term and termination. The usual China trademark license is for a 20 year term, but it can and does vary. Normally, the sole basis for terminating the licensing agreement is for the Chinese company failing to pay the license fee. It is possible to provide for a minimum annual royalty payment and falling short allows for early termination, but this is fairly unusual.
- The technology to be covered.
- If training in how to use the technology will be required, it will nearly always make sense to use a separate training agreement for this.
- If the trademark license will require the licensed product incorporate components manufactured and sold by you as the licensor, it will likely make sense to have a separate purchase and sale agreement for those components.
There you have it….
Dan Harris is founder of the Harris Bricken law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes ChinaLawBlog.com as a source of China legal and business information.