Licensing Your Innovation: A Guide for South African Entrepreneurs
- mzuzukilesoni
- May 2, 2024
- 2 min read
Your intellectual property (IP) – that trademark, invention, or design – is a valuable asset. Licensing it can be a great way to generate revenue, expand your reach, and share your creation with the world. But before you shake hands on a deal, there are key considerations for South African entrepreneurs venturing into IP licensing.
Terms of the Deal:
Exclusivity vs. Non-Exclusivity: Do you want just one licensee, or multiple? A non-exclusive license allows others to use your IP too, potentially creating wider brand awareness but with less per-licensee profit.
Territory: Where do you want your IP used? Granting a worldwide license maximizes reach, but a regional license can be more profitable if demand is concentrated in specific areas.
Term: This defines the duration of the license. A shorter term allows you to revisit terms and potentially renegotiate for improved benefits later. A longer term offers stability for both parties.
South African Considerations:
Exchange Control: South Africa has regulations on externalizing IP. If your licensee is not South African, you'll likely need approval from the South African Reserve Bank to ensure a fair market value exchange. Consulting a lawyer familiar with IP and exchange control is crucial.
Tax Implications: Income from licensing is taxable. Understanding tax implications upfront will help you structure the deal efficiently.
Aligning with US Export Controls?
The US maintains a list of sanctioned countries and entities with trade restrictions. Aligning your licensing strategy with this list can be complex. Here's why you might consider it:
Reduced Risk: Following US export controls can minimize the risk of sanctions or restrictions on future US business dealings.
Market Access: Some countries may prefer to partner with companies that comply with US export controls.
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