The decision of whether or not and when it would be desirable to enter into a licensing agreement is always based on a commercial evaluation. So it is not always easy to be clear about when would be the best time to enter into a licensing agreement.

It is however advisable that both parties, prior to commencing negotiations, draw up an agreement comprising a non-circumvention agreement, a declaration of intent and a confidentiality agreement, so that both parties are clear about what happens if negotiations fall through.

There are certain situations where it would be particularly advantageous to enter into a licensing agreement:

Licensor:
If you are a licensor it could be a good idea to out license your design if, for example, you have registered your design in the EU via OHIM.

Often several designs are registered when new products are being developed, but it is not definite that all of them will be needed. Instead of leaving these designs unused you could license them to others and generate a profitable income.

Lastly, a licensing agreement is a good idea if you want to operate in markets in a new geographical area and lack the necessary resources or competencies to set up a business from scratch. A possible partner could then be a company with good production facilities, a well-developed distribution network, or good access to retail channels.

Licensee:
If you have some free production capacity or greater capacity in your distribution network for example, then a licensing agreement for a design could be a good way to see orders increase.

It can also be good business to take out licences for well-known designs or designs on the way up. By licensing these kinds of design you will be getting a share in the value already established by the design.

A purchase or sales agreement is an agreement, between the owner of a design and an interested buyer, on the transfer of ownership of a complete design or a section of a design in all or certain countries.

A transfer of ownership for a section of a design requires a so-called division. This must be applied for at the appropriate Design Office.

If you are buying or selling a company you must remember that the trademarks or designs linked to a particular product are also included in the purchase or sale. These assets must therefore also be valuated in line with the other company assets.

There are several situations where it would be a good idea to buy a design from another company or owner of a design. There may be situations where you want to avoid using resources on developing something that has already been developed by others. For example, you may have the production facilities for a certain kind of product and you know that another company has designed a very attractive look for a similar product. In this case, buying their design will save you money as you won’t be spending time and money on developing something which has already been designed.

If you are interested in buying a design, you could adopt the following strategy: Perform a preliminary search in the publicly available design registers e.g. Hague Express, RCD-Online, or national databases such as PVSonline (in danish only). If the design you want to use already exists you could contact the owner and propose that you both enter into an agreement whereby you obtain the right to use the design.

It is very important that you remember to valuate the designs that are included in the sale when undertaking a part or whole sale of a company and drawing up the agreement. Today it is estimated that up 70% of a company’s assets can be ascribed to its intangible assets, such as designs.

Therefore it is also important that you obtain a registration for your design. If you are in the development phase you can request a design search. It will give you a professional opinion as to whether the design you have in mind is new or too similar to any existing designs. This will provide you with an overview of the potential risk of having your design rights contested if you register your design.

If you have an unused design in your portfolio you could consider selling it to an interested buyer – e.g. the whole design or a section of it for certain countries or all countries in which the design is registered. In this way you capitalize on the value inherent in obtaining registration for your design.

Lastly you could sell a design if you have licensed it out and now want to transfer complete ownership of the design to the licensee. Perhaps the licensing agreement does not fit in with your current portfolio or that for some reason or other it no longer fits in with the company strategy.

Valuating a design is a complicated discipline. Therefore we recommend that you obtain professional advice, e.g. solicitors specialized in the area, accountants and other advisers. Below is some information on some of the things you should consider.

There are two aspects you should consider when assessing the value of a design: the validity of the design and its market potential.

Validity
When you are valuating a design that you want to license you should start by making sure that the design is valid. If you are a potential licensee, you must be sure that the design is registered. It is also important to know which countries the design is valid in and if there are any infringement cases pending.

Market potential
It can be difficult to valuate a design right as an individual commodity. It is important however to think in terms of the design’s performance to date and its estimated future earnings when entering into a purchase, sales or license agreement for the design. You can get help with valuating a design’s market potential – see the list of professional advisers.