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What to think about when licensing your tech in China

Whether the new tech you have created is software or an impressive new gadget, it can be exciting to watch your hard work pay off once it begins to sell. As you build your business and your brand, you may start to consider licensing what you have created to foreign markets.

Expanding into the Chinese market can be an incredible opportunity. By licensing your tech product in China, you have the chance to move into a growing marketplace. 

While you may realize certain risks can come with granting a Chinese company a license to your tech, you will want to pay specific attention to these parts of your licensing agreement.

The importance of language

You know that the words in an agreement are important, but when you are trying to license your company’s technology in China, the official language of the agreement can play a big part in having an enforceable contract. Not only should your agreement be in both English and Chinese, but you should also make sure that Chinese is the “official language” of the document.

The official language needs to be Chinese so that it can be registered with China’s Trademark Office. If Chinese is not the official language of your licensing agreement, you could run into problems with your royalty payments getting through The Bank of China.

Preparing for payment

The entire purpose of licensing your tech in China is to be able to build your brand and, ultimately, collect royalties. Receiving payment in China can be more complicated than what you may be used to in the United States. While places in the US tend to be willing to make payments on shorter terms, this is not the case in China.

Typically, the payment term will be annual or semi-annual, with no room for negotiating a shorter term. In some cases, you may want to require the first yearly payment in advance since there have been occasions where American businesses have not received payment.

Terms for termination

Carefully consider the language in the agreement that discusses termination. The most common reason for terminating a licensing agreement comes from problems with the Chinese company providing payment.

In most cases, a licensing agreement in China lasts for 20 years. Make sure you have protection if the company you are working with does not follow through with their end of the deal. You will want a provision to be able to terminate the agreement if you are not receiving payment or the other company is abusing their license.

There can be tremendous benefits to expanding your market from the U.S. to China. Be confident, however, that your licensing agreement protects your interests.

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