Nine Musts for a Succesful License Agreement in Korea

License Agreements in Korea are too often, simply, a spinning of license agreements used in the West.  Your foreign license agreement, in most cases, is not adequate for your needs in Korea. 

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

3.   Inspection  
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.

6.  Arbitration
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.

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Sean Hayes may be contacted at: [email protected]
Sean Hayes is co-chair of the Korea Practice Team for an international law firm. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty.

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