magazine for business and investment - Innovatives Niedersachsen

Companies
Niedersachsen Global 53
Image: Herfurth & Partner
Ulrich Herfurth, German Attorney
Technology Licensing in Germany
A company can choose to either develop its own innovations or purchase the desired innovation
from another party. The German attorney Ulrich Herfurth about the details.
A company can choose to either develop its own innovations
or purchase the desired innovation from another party.
Every cooperation contract which includes the transfer of
technology and usage of patents, design, trademarks and
brands, must also contain provisions regarding the appropriate
licensing agreement.
Depending on the nature of the business activity, the
license can refer to the production or sale of the products as
well as to the usage of trademarks. The content of a license
is generally considered to be a commodity, which is owned
solely by the licensor (know-how) or a right to which he is
entitled (patent, prototype protection, trademark and brand).
Due to the provisions of national and international
competition protection law, there may be limitations on the
unrestricted construction of license agreements between
contract parties. The strict German competition protection
law expressly considers the agreement of the contract parties
to be anticompetitive; if the limitations placed on the content
of the licensed rights (i.e. patents or company secrets) are
excessive. Even non-challenge clauses against the rights of
the licensor may be anti-competitive and therefore ineffective.
Also, a clause prohibiting the licensee from manufacturing
or distributing competing products is usually in breach of
competition law and requires justification. For this purpose,
the European Union has issued a block exemption regulation
for technology transfer. The amount of the license fees
should be negotiated between the parties based on their
commercial interests.
The benchmark is often a combination of what the
licensee saves in his development expenses and the amount
of benefit he can obtain through the production and sales
of a product made from the knowledge acquired from the
licensor. The interest of the Licensee corresponds most closely
with a license fee, which is based on current sales of
replica products. The Licensor also partakes in this way in
the exceptional success of the licensee. However, he runs the
risk of getting very little revenue if the Licensee’s business is
not profitable. However, if he wishes to avoid this risk, it is
better to agree on a fixed payment. The combination of both
methods is also possible. To cover the expenditure associated
with the initial technology transfer, it is recommended to
agree upon a down payment. Finally, it is also important to
note in the calculation of royalties, that withholding taxes are
frequently imposed on royalty income.
Contact
Ulrich Herfurth herfurth@herfurth.de
www.herfurth.de