Our 9 Musts before Engaging in a License Arrangement in Korea
1. Due Diligence
Say it three times and read my posts: Doing Business in Korea: Due Diligence, Agreements, Attorneys and Street Smarts
2. Royalty Clause
Include in your license agreement a royalty clause. The clause should detail, at a minimum:
- Currency conversion rate or payment in the currency of your home nation
- Payment terms
- Accounting and audit particulars
- Tax treatment
An inspection of the first batch of goods is a necessity and periodic inspections are recommended for most products. Agents are available to conduct these inspections.
4. Choice of Law
If the license is for a smaller value, often, it is best to simply utilize Korea as the choice of law. It will save you expenses, since, hopefully, you will be having someone experienced in license agreements in Korea drafting your license agreements.
5. Choice of Jurisdiction
Again, to save on costs, often, the best choice is to simply utilize the Seoul Central District court as the jurisdiction for the resolution of the dispute.
We, always, recommend litigation in all cases where the costs justifies arbitration. Often, arbitration will lead to greater legal feels than having a dispute resolved at a Korean court. However, arbitration, as explained in numerous posts on this and other blogs is beneficial to both parties in most cases. Our choice is, always, Hong Kong with NY as our second choice.
7. Protect your IP. Say protect your IP three times and read my short post entitled: Don't Just Trust Us: Trademarks in Korea.
8. Listen to my Mother and Read her Advise at: Listen to My Mother: JVs in Korea. Ok a license is not a joint venture, but the advice holds true.
9. Language. Have the governing language be English, but draft the license agreement in English and Korean. Make sure that you don't have an argument in the future that the Korean licensee didn't understand the particulars of the agreement.
SeanHayes@ipglegal.com IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com