Finally, it is usually the licensee who bears the exchange risk when royalties are paid in a currency other than the licensee`s original currency. Although it is often possible to cover foreign exchange risk over a relatively short period of time (one to two years) due to practical constraints, it may not be possible to hedge effectively in the long term. Because the duration of licensing agreements generally exceeds a short period of time, the licensee may be exposed to a devaluation of its revenues on the basis of long-term structural economic factors in the territory of the licence. The licensee should take this risk into account when setting an acceptable royalty rate. This type of agreement allows Harvard researchers who are creating a new licensed business without difficulty to copyrighted non-patentable software that they have developed as part of the faculty`s research efforts. In cases where there are patentable topics such as unique algorithms, please read the “Exclusive Basic License” agreement model published above. 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. While the taker usually pays the value received by the donor in the form of cash licenses, the taker can also offer his grantee other valuables.
The licence fee is influenced by the respective estimates of the licensee and the licensee with respect to the aggregator of the sales potential in the territory of the licence under the characteristics of the licensee. A licensee with strong financial viability and a well-established market presence can provide immediate support and credibility for licensed products. The licensee can also add value to the licensee in the form of product improvements and new product developments.