As a form of exporting, technology licensing has certain potentialdrawbacks. The negative aspects of licensing are that (1) controlover the technology is weakened because it has been transferredto an unaffiliated firm and (2) licensing usually produces fewerprofits than exporting goods or services. In certain Third Worldcountries, there also may be problems in adequately protectingthe licensed technology from unauthorised use by third parties.In considering the licensing of technology, it is important toremember that foreign licensees may attempt to use the licensedtechnology to manufacture products that are marketed in theexporters’ market or third countries in direct competition withthe licenser or its other licensees. In many instances, licensersmay wish to impose territorial restrictions on their foreign licensees,depending on antitrust laws and the licensing laws of the hostcountry. Also, patent, trademark and copyright laws can oftenbe used to bar unauthorised sales by foreign licensees, providedthat the licenser has valid patent, trademark, or copyrightprotection.As in all overseas transactions, it is important to investigate notonly the prospective licensee but the licensee’s country as well.The government of the host country often must approve thelicensing agreement before it goes into effect. Such governments,for example, may prohibit royalty payments that exceed a certainrate or contractual provisions barring the licensee from exportingproducts manufactured with or embodying the licensedtechnology to third countries.The prospective licenser must always take into account the hostcountry’s foreign patent, trademark, and copyright laws; exchangecontrols; product liability laws; possible counter trading or barterrequirements; antitrust and tax laws; and attitudes towardrepatriation of royalties and dividends. The existence of a taxtreaty or bilateral investment treaty between the licensers’ country
437Global MarketingCopyright World Education Counciland the prospective host country is an important indicator of theoverall commercial relationship.
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439Global MarketingCopyright World Education CouncilWhether or not a restraint is reasonable is a fact-specificdetermination that is made after consideration of the availabilityof competing goods or technology; market shares; barriers toentry; the business justifications for and the duration of contractualrestraints; valid patents, trademarks, and copyrights; and certainother factors. The U.S. Department of Justice’s Antitrust