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Giving license on our products

Isom, KY |

we are about to sign an agreement regarding giving a license to another company in India. Our company manufactures coal washing plants and we will be giving our drawings to India and they will produce and sell our equipment in there Country. We are afraid of giving our drawings for 5 years then being out of the agreement which we are sure will allow them to manufacture all our products by there own. Please be so kind to inform us on how we can protect our Company. Thank you.

Attorney Answers 3


You have a boatload of significant legal issues wrapped up in this deal.

First and foremost -- you should NOT sign the agreement w/o first having your own attorney review, and quite likely amend, the agreement.

Not only is having an attorney review necessary to protect your company's interests it is quite likely a violation of your fiduciary duty to the company [assuming that the company is a corporation or partnership] to sign the agreement w/o having it reviewed by an attorney. Which means that whoever signs the agreement could be liable to the other company owners if things go south with your relationship with the Indian company.

Second, you should negotiate this deal with the ASSUMPTION that the Indian company will breach the agreement. This mindset is true for all licensing deals -- not just with Indian companies. The assumption is more relevant and influential, however, whenever a US company is contracting with an overseas company because [usually] the only way to enforce the agreement is by litigating the dispute OVERSEAS -- which is very often financially prohibitive. In short, you wouldn't be able to do anything if the overseas company breached the agreement. This assumption argues for you negotiating the bulk of your payment being received up front instead of on an ongoing basis.

Third, before you produce any equipment schematics you must register the copyright in those drawings -- both in the US and in India. And you need to affix a proper copyright notice on them.

Fourth, your equipment design may be patentable and/or protectable under trade secret law. You need to evaluate these legal protections [under both US and Indian law] before you disclose your equipment schematics.

You need to hire an intellectual property attorney licensed to practice in your state to help you properly negotiate this deal. You and your attorney should spend some time learning about how to enter this deal most effectively. Some free resources are:

The U.S. Commercial Service [ ] provides guidance and very useful, country-specific resources to help small businesses sell their products overseas. It has offices in over 100 U.S. cities and nearly 80 countries around the world—the latter with foreign national employees whose role it is to provide U.S. small businesses with invaluable information and insight.

As far as intellectual property rights, the Trade Compliance Center [ ] of the Market Access and Compliance section of the U.S. Commercial Service provides information about intellectual property, counterfeiting, and foreign trade rules and regulations.

U.S. Bureau of Industry and Security [ ] export counselors provide guidance on regulatory requirements related to dual-use export controls. BIS’ objective is to assist exporters with determining their obligations to remain in compliance with Export Administration Regulation (EAR) laws.

Hire an attorney. Good luck.

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One way you would keep them from using your technology after the licensing agreement runs out is to obtain patent protection in India for your technology. Putting aside the challenges that you could face from enforcing a patent in India against an Indian company, there are several challenges you face in even obtaining the patent. For purposes of this discussion, I am assuming that Indian patent protection is not a viable option due to your public disclosure of the technology and/or that it is unpatentable.

Your question is really about Indian law because it is Indian jurisdiction. You need to contact an Indian attorney who can counsel you with this matter. There may be a non-compete clause that can be added to the licensing agreement for after the agreement terminates. There may also be trade secret options that you have. You should contact a U.S. attorney who specializes in intellectual property and who has patent attorney associates in India who can help with this.

Disclaimer: In no way is this information considered a legal advice, but is only a statement of the law. This information does not form a client-attorney relationship.

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You have a significant technological product that has been given a vote of confidence by a company that wants to pay for it.This is probably a very important part of your company's business. It is smart to check with Avvo because the attorneys here can provide a great deal of insight. Do you think it is a good idea to seek the whole legal answer answer here for free from people with whom you do not have an attorney-client relationship?
When I work on an international deal, we look at all sorts of angles. How did you select the price they will pay you? How do you know you are not leaving a great deal on the table? How will the cash flow? Who will audit their reports to you? How much money do you hope to make? How much money can you make if the deal is set up right? Do you believe that you would save money by not getting legal and accounting advice? Do you know how much money you could lose if you do something wrong?

These are just questions. You might find it useful to answer these questions just to yourself. I believe that business owners should look at many aspects when making a business decision. It sounds like you have come up with some good technology. I hope you make as much money as possible from it.
I wish you the best in this endeavor.

This is NOT legal advice. It is a business comment. There is no attorney-client relationship.

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