In Vietnam, intellectual property licensing agreements are not only an important tool for protecting corporate innovations, but also a key document to ensure smooth business cooperation. With the rapid development of Vietnam’s economy, more and more domestic and foreign companies are choosing to do business in Vietnam. Therefore, the transaction and protection of intellectual property rights have become particularly important. Whether it is patents, trademarks, or copyrights, companies need to clarify the rights and obligations of all parties through licensing agreements to avoid disputes and losses that may arise in the future.
Ensuring the integrity of an IP licensing agreement is a basic requirement for companies to succeed in the Vietnamese market. A complete licensing agreement should not only include clear licensing scope, exclusive rights, royalties and payment terms, but also cover key aspects such as IP protection and enforcement, confidentiality clauses and dispute resolution mechanisms. The absence or ambiguity of these terms may lead to legal risks and affect the company’s business operations in Vietnam.
This article will discuss in detail the core clauses that should be included in Vietnam’s intellectual property licensing agreements, and provide interpretations and suggestions on relevant clauses based on Vietnam’s current laws and regulations, to help companies better protect and manage their intellectual property rights in the Vietnamese market.
1. Scope of License
In Vietnam’s intellectual property licensing agreements, the scope of the license is a key clause that determines under what conditions the licensee can use the licensed content. The scope of the license usually includes three main aspects: territory, time, and method of use.
1. Territorial Scope
The territorial scope specifies the geographical area in which the licensee can use the IP. For example, a license agreement may only allow use within Vietnam, or extend to the entire Southeast Asia region, or even globally. Under Vietnamese law, the licensor can limit the licensee’s market through the territorial scope to avoid competitive impact on other markets. In addition, clarifying the territorial scope helps better protect the licensor’s rights in the event of a dispute.
2. Duration of License
The time frame refers to the validity period of the license agreement. In Vietnam, the time frame of a license agreement can be a fixed period, such as 5 years, or it can be terminated based on the fulfillment of a certain condition, such as project completion or the achievement of sales targets. Vietnamese law allows for flexible setting of the license period according to the wishes of both parties, but it is recommended to clearly state it in the agreement to avoid disputes due to ambiguity in the future.
3. Mode of Use
The usage specifies how the licensee can use the intellectual property, including but not limited to production, sales, modification, translation, etc. Vietnamese law requires that the permitted usage be clearly listed in the license agreement and prohibits the licensee from using the intellectual property in an unauthorized manner. By limiting the usage, the licensor can effectively control the use of the intellectual property and protect its commercial interests.
Sample clause:
“This License Agreement grants the Licensee exclusive rights to use the Licensed Content in Vietnam for a period of five years from the date of signing the Agreement. The Licensee may only use the Licensed Content for the production and sale of authorized products and may not use it for any other unauthorized purpose.”
explain:
The above clauses specify three key elements of the scope of the license: first, the geographical scope is limited to Vietnam to ensure that the licensee will not use the intellectual property in other markets; second, a five-year license period is set; and finally, the licensee is limited to specific production and sales activities. In this way, the licensor can ensure that the use of its intellectual property is within a reasonable scope and maximize the protection of its legal and commercial rights.
2. Exclusivity
Exclusive rights clauses play an important role in intellectual property licensing agreements because they determine whether the licensee has the exclusive right to use a certain intellectual property. In an exclusive license agreement, the licensor usually grants the licensee the exclusive right to use the intellectual property in a specific field or geographical area, which means that during the license period, the licensor cannot grant the same rights to other third parties. This arrangement can provide the licensee with a competitive advantage in the market and ensure that it can exclusively enjoy the commercial benefits brought by the intellectual property.
The difference between an exclusive license and a non-exclusive license lies primarily in the exclusivity of the rights. In an exclusive license, only the licensee can use the intellectual property, while in a non-exclusive license, the licensor can grant the same rights to multiple licensees, resulting in multiple parties using the same intellectual property at the same time. This difference has a significant impact on a company’s market strategy and competitive position. For example, an exclusive license can give the licensee greater market control, but it may also result in higher licensing fees or stricter agreement terms.
According to Vietnamese law, exclusive rights must be clearly defined in the license agreement, including the scope, time, territory and specific content of the rights. Such clear provisions not only help avoid possible disputes in the future, but also ensure the legality and enforceability of the agreement. In addition, Vietnamese law also requires that any license agreement involving exclusive rights must be formally filed so that it can be effectively protected in legal disputes. Therefore, when drafting or reviewing exclusive license agreements, companies should ensure that the terms are clear and comply with the requirements of relevant Vietnamese laws.
3. Protection and Enforcement of IP
In an IP licensing agreement, it is crucial to clearly define the responsibilities and obligations of the licensor and licensee in protecting and enforcing IP rights. The licensor is generally responsible for ensuring that the IP rights it licenses are valid and inviolable in Vietnam, and is also responsible for taking necessary legal action when infringement is discovered. The licensee is obliged to use the IP rights in accordance with the agreement and take reasonable measures to prevent infringement, such as protecting trade secrets and proper use of trademarks.
According to Vietnam’s Intellectual Property Law, the responsibility to protect intellectual property is not limited to the contractual obligations of both parties, but also includes compliance with national laws. For example, Vietnamese law requires the licensor to ensure that its intellectual property has been registered and legally protected in Vietnam before authorization. At the same time, the licensee should comply with relevant regulations and shall not modify or expand the scope of use of the intellectual property without the consent of the licensor.
When dealing with potential infringement issues, the parties should clearly define the definition of infringement and the response strategy in the agreement. Vietnamese law allows for the resolution of infringement disputes through a variety of channels, including mediation, arbitration and litigation. In the agreement, it is recommended to include specific procedures and steps to enable a quick response when an infringement occurs. For example, it can be stipulated that one party must immediately notify the other party when an infringement is discovered, and jointly take legal action if necessary. In order to better protect the interests of both parties, it is recommended to clearly specify the expenses and responsibilities borne by each party in the agreement to avoid disputes when infringement disputes occur.
In general, in Vietnam’s intellectual property licensing agreements, clearly defining the responsibilities and obligations of both parties in protecting and enforcing intellectual property rights and combining them with the requirements of Vietnamese law can effectively reduce the risk of infringement and safeguard the legitimate rights and interests of both parties.
4. Royalty and Payment Terms
In an intellectual property licensing agreement, the royalty structure is one of the core elements, which directly affects the profit distribution and financial arrangements of both parties. Common royalty structures include the following:
The first is Lump Sum Payment, which is usually a one-time payment of all fees when the agreement is signed. It is suitable for cases of clear authorization and is convenient for both parties to settle accounts. The second is Periodic Payments, which is a payment made in installments based on time periods (such as monthly, quarterly or annually). It is suitable for long-term cooperation and continuous authorization scenarios. The last is Revenue Share, which means that the licensee pays the royalties in proportion to the revenue from the sale of products or services. This method is more flexible, but requires accurate sales records and regular reports.
In Vietnam, under current laws, the payment of royalties is subject to strict tax regulations. Royalties are usually subject to corporate income tax and value-added tax, with the specific tax rate depending on the payment method and the terms of the license agreement. When paying royalties, companies must declare and pay them in accordance with the requirements of the Vietnamese tax authorities to avoid fines or legal disputes due to tax compliance issues.
In actual operation, the setting of the royalty clause should be as clear as possible, covering details such as payment time, method, tax liability, etc. For example, the agreement should clearly stipulate that “the licensee shall pay the royalty within 10 working days at the end of each quarter according to the agreed proportion based on the sales of the previous quarter. All royalty payments shall be deducted from relevant taxes, and the licensee shall bear the tax declaration responsibility.” Through meticulous clause design, the uncertainty in execution can be effectively reduced and the legitimate rights and interests of both parties can be ensured.
These terms and structures are not only widely used in the Vietnamese market, but also applicable to international intellectual property transactions. Therefore, when companies conduct intellectual property licensing in Vietnam, they should pay close attention to relevant legal requirements and choose the most appropriate royalty structure based on their own business characteristics to ensure the compliance and operability of the agreement.
5. Ownership and Assignment of IP
In an IP licensing agreement, it is crucial to clearly define the ownership and transfer terms of the IP, especially when it involves improvements or derivative works developed in the future. Typically, a licensing agreement covers not only existing IP, but may also cover new technologies, new products, or improved technologies developed during the licensing period. In this case, the parties must clearly agree on the ownership of these newly developed IP to avoid disputes in the future.
According to Vietnamese law, the ownership of intellectual property rights usually depends on the specific provisions of the contract terms. If there is no clear provision in the contract, Vietnamese law will determine it based on the specific circumstances. Therefore, in the licensing agreement, the company should list in detail all types of intellectual property rights involved, including but not limited to patents, trademarks, copyrights, and derivative works or improvements that may be generated in the future, and clearly stipulate their ownership.
In addition, the transfer of intellectual property rights also needs to be clearly stipulated in the agreement. Vietnamese law requires that any transfer of intellectual property rights must go through legal procedures, including but not limited to signing a formal transfer agreement and registering and filing with relevant government departments. In order to prevent possible disputes in the future, it is recommended that the conditions and procedures for the transfer, as well as the rights and obligations of the transferor and the transferee under specific circumstances, be detailed in the license agreement.
By spelling out the ownership and transfer terms of intellectual property rights in the licensing agreement, enterprises can effectively reduce the legal risks they may face in operating in the Vietnamese market and ensure the legitimacy and security of their intellectual property rights. These terms not only protect the interests of the licensor, but also provide clear legal protection for the licensee, thereby promoting long-term cooperation between the two parties.
6. Confidentiality Clauses
In intellectual property licensing agreements, confidentiality clauses are crucial, especially when know-how is involved. Know-how is often a company’s core competitive advantage, and during the licensing process, this information may need to be disclosed to the licensee. In order to prevent this critical information from being misused or leaked, confidentiality clauses can provide legal protection for both parties and ensure that the information is only used for the purposes specified in the licensing agreement.
According to Vietnamese legal requirements, a confidentiality agreement must clearly specify the scope of confidential information, the duration of confidentiality obligations, restrictions on the use of information, and the legal consequences of breach of contract. Vietnamese law also has relatively strict regulations on the implementation of confidentiality agreements. Once a leak or unauthorized use of confidential information occurs, the owner of the information has the right to seek compensation or other remedies through legal means. Therefore, when formulating confidentiality clauses, companies should carefully consider the sensitivity of various types of information, clarify which information should be included in the confidentiality category, and ensure the clarity and enforceability of the clauses.
The following key elements should be included in the recommended confidentiality clause: first, clearly define “confidential information” and list which information is confidential; second, specify the specific content of the confidentiality obligation, including that the recipient shall not disclose, copy or disclose confidential information to a third party in any form; third, set a term for the confidentiality obligation, which is usually valid for a number of years after the termination of the agreement; finally, add a legal remedy clause to clarify the legal action that the party that abides by the confidentiality agreement can take if the confidentiality agreement is breached.
Through such detailed confidentiality clauses, enterprises can effectively protect their intellectual property rights and trade secrets and ensure that their competitive advantages in the Vietnamese market are not infringed.
7. Term and Termination
In an IP licensing agreement, it is crucial to clearly define the validity period and termination conditions of the agreement. The validity period of a licensing agreement is usually set based on factors such as the nature of the license, the commercial objectives of both parties, and the life cycle of the technology. The validity period can be a fixed number of years or based on the achievement of certain specific events or results. In Vietnam, the validity period of a licensing agreement should be clearly written into the contract and managed in accordance with the provisions of the Contract Law.
Regarding the termination conditions of the agreement, both parties should clearly list the circumstances that will lead to the early termination of the agreement. Common termination conditions include expiration of the contract, breach of contract by either party, termination of the contract by mutual agreement, or force majeure. Vietnamese law allows both parties to agree on the termination conditions in the agreement, but the fairness and rationality of these terms should be ensured to avoid unilateral disadvantages to one party. If the agreement is terminated due to breach of contract by one party, the party that complies with the contract can claim compensation for losses in accordance with Vietnamese contract law.
In terms of legal consequences, in Vietnam, if a licensing agreement is terminated due to breach of contract or other legal reasons, the breaching party may face legal liability, including compensation for losses of the non-breaching party. In addition, in some cases, the right to use the intellectual property rights may be immediately returned to the licensor, or the court may decide on its subsequent handling.
For example, the agreement may include the following clause: “This agreement shall take effect from the date of signing and shall be valid for five years. If one party seriously breaches the agreement, the other party shall have the right to terminate this agreement immediately upon written notice. Upon termination of the agreement, the licensee shall immediately cease using the licensor’s intellectual property rights and return or destroy all related documents and materials within 30 days.”
In terms of operation, it is recommended that both parties fully discuss and confirm the validity period and termination clauses of the agreement before signing it to avoid future disputes. At the same time, the company should maintain good communication and performance records during the agreement to reduce the risk of early termination of the agreement.
8. Dispute Resolution
In Vietnam, IP disputes are usually resolved through arbitration and litigation. Arbitration, as a more flexible and confidential dispute resolution method, is usually preferred by companies in disputes involving technology or trade secrets. Vietnam’s Commercial Arbitration Law provides a legal basis for arbitration procedures, allowing parties to choose arbitration institutions and arbitrators in the agreement, making the arbitration process more controllable.
On the other hand, litigation is the traditional way to resolve disputes through the Vietnamese court system. According to Vietnam’s Civil Procedure Law, IP cases are usually heard by specialized IP courts, which have the professional ability to handle complex IP issues. Although litigation may be time-consuming and expensive, in some cases, such as when major rights and interests are involved or when enforcement is required, litigation is still the choice of many companies.
In an IP licensing agreement, it is crucial to clarify the dispute resolution mechanism. Enterprises should clearly stipulate in the agreement the preferred dispute resolution method (such as arbitration or litigation), the applicable law and jurisdiction, and how to initiate the dispute resolution procedure when a dispute occurs. Usually, the agreement will also include specific steps for dispute resolution, such as the order of negotiation, mediation, arbitration or litigation, to ensure that there is a clear resolution path when a dispute occurs. In addition, when drafting these clauses, enterprises should fully consider the relevant provisions of Vietnamese law to ensure the enforceability and legality of the clauses, thereby reducing potential legal risks.
9. Miscellaneous Clauses
In an intellectual property license agreement, in addition to the core terms, additional terms are equally important, and these terms often determine how the agreement is executed and interpreted. Common additional terms include force majeure, applicable law, and contract interpretation terms, which are of great significance to the smooth conduct of a specific business.
Force Majeure ClauseIt stipulates how the responsibilities and obligations of both parties are adjusted in the event of unforeseeable and uncontrollable circumstances, such as natural disasters, wars or changes in laws. Under Vietnamese law, the definition of force majeure events is relatively broad. Generally, the parties to the contract can agree on specific force majeure situations and countermeasures. It is recommended to clearly list possible force majeure events in the agreement and explain in detail the rights and obligations of each party in this case to reduce potential disputes in the future.
Applicable LawIt determines which country’s law the contract should be interpreted and enforced in the event of a dispute. Licensing agreements signed in Vietnam are usually subject to Vietnamese law, but in cross-border business, the parties may also choose to apply the laws of other countries. However, Vietnamese law has certain requirements for the applicable law clauses in the contract, especially in cases involving Vietnamese public order and mandatory provisions, Vietnamese law may still be applied first. Therefore, it is recommended that enterprises carefully consider the impact of local Vietnamese laws when drafting applicable law clauses, and seek advice from legal experts when necessary.
Contract interpretation clauseIt is mainly used to clarify the principles of interpretation of various parts of the agreement, especially when there may be multiple interpretations of the contract terms. Vietnamese law allows the parties to the contract to specify the priority of interpretation in the agreement, usually stipulating that the text shall prevail, the common understanding of the parties, etc. In addition, it is recommended to include specific ways to resolve conflicts in this clause, such as the formally signed document shall prevail or the more detailed terms shall take precedence.
By carefully formulating these additional clauses, companies can ensure that they can better deal with various uncertainties during the execution of the agreement and safeguard the legitimate rights and interests of all parties.
10. Conclusion
When doing business in Vietnam, the comprehensiveness and compliance of intellectual property license agreements are crucial. Ensuring that every clause of the agreement complies with the requirements of Vietnamese law can not only effectively protect the company’s intellectual property rights, but also avoid possible legal disputes and financial losses in the future. Due to the complexity and constant changes in intellectual property laws, companies must pay great attention to every detail when drafting or reviewing license agreements.
In order to ensure the legal validity and compliance of the agreement, companies should actively seek the help of legal professionals. These experts can provide the latest interpretation of the Vietnamese legal framework and assist companies in formulating agreement terms that meet their business needs. Through professional legal advice, companies can reduce risks and ensure the smooth progress and sustainable development of their business in the Vietnamese market.
