Corporate Lawyer Magna Utah

Corporate Lawyer Magna Utah

Many businesses in Magna, Utah are using licensing agreements to grow. Don’t be left behind. However licensing is a complex process. You will need the services of an experienced Magna, Utah corporate lawyer. When you need help with starting a business, closing a company, corporate governance, mergers, acquisitions, purchases, sales, LLCs, etc. Please make sure you call Ascent Law LLC for your free business consultation.

Licensing Agreement

Every licensing arrangement has a number of advantages and disadvantages to both the licensor and the licensee. This may be largely attributed to the fact that the lease of the intellectual property rights covered by the license agreement creates a form of reliance between the parties and, to some extent, restricts their independence with regard to commercial activities in a particular area. As a result, it is important that you consult with a Magna, Utah corporate lawyer to assess the objectives and skills of the other party prior.

General Advantages of a Licensing Arrangement

The parties to a licensing arrangement may have a number of different objectives. Certainly, for a licensor, one of the goals is to realize revenues from the use of technology by the licensee which can be offset against any of the expenses associated with the development or acquisition of the subject technology. From the licensee’s perspective, a licensing agreement often represents a cost-effective method for accessing new technologies that fit into the licensee’s overall strategic business plans. For both parties, the license should facilitate the creation of a relationship in which each party is permitted to contribute its specific strengths while, at the same time, taking steps to minimize any weaknesses or functional limitations in its own competitive capabilities.

Access to Vertical Capabilities

The “life cycle” for any product requires successive focus upon such disparate capabilities as research and development, the refinement of products for production, acquisition and processing of raw or semi-finished materials, manufacturing, distribution, sales and marketing, and service. In those cases where a firm may lack the financial or managerial resources to independently fulfill each of the tasks needed to bring a product to market, a licensing arrangement with one or more parties can provide the firm with the required access to other vertical capabilities to allow the firm to fully exploit it current strengths.

For example, a firm may possess the technical skills for the development of new products yet lack the financing and facilities required for large-scale production and manufacturing. However, if the firm is able to license the technology to a firm with the resources capable of producing the new products on the requisite scale, it is then able to exploit its technical skills without taking on the costs and risks of developing its own production capability. The firm might consider using the proceeds from the sale of the various new products to finance the acquisition of its own manufacturing function. If this is the case, the licensor will seek to structure the original license so that the manufacturing rights revert to the licensor when it is ready to take over production itself.

Technology Acquisition and Exchange

A firm may look at a licensing arrangement as a means of acquiring new or existing technology that may be needed in order for the firm to lawfully continue its own development and product sales efforts. Given the rapid technical changes that sweep across almost every industry, even the largest firm may no longer be able to keep pace with research in all areas. As a result, firms will maintain their technological portfolio through licensing arrangements with other commercial entities, universities, and research organizations, including entities located outside of the United States, without subjecting themselves to the costs and risks associated with new development efforts.

Licensing also presents an attractive vehicle for exchanging technology and marketing information between the licensor and the licensee. For example, a licensor may grant a license to a licensee actively involved in research and development activities which may result in enhancement and improvements to the licensed technology. By using grant-back clauses, which provide for a license from the licensee to the licensor of any improvements made to the basic technology, it is possible for the original licensor to minimize the costs associated with further development of the technology. Similarly, the grant of a license for the sale and distribution of the licensor’s products may also permit the licensor to gain valuable information about new markets.

Market Penetration

Market penetration is one of the primary attractions of a licensing arrangement for both parties. For a firm that lacks the distribution network necessary to sell its new products in a given market, a licensing agreement with an experienced distributor will facilitate rapid market entry and allow the licensor to generate revenue from sales in a new market without the need to commit any significant new capital to the development of a direct sales force. From the distributor’s perspective, the licensing agreement may allow it to use its sales channels to distribute a line of products that might not have otherwise been available through its internal development efforts or allow it to exploit the reputation and goodwill associated with the licensor’s products.

Even in those cases where the licensor may have some sales capability, there will be situations where it is more efficient to engage licensees with specific expertise in a given geographic or product market. However, the success of this type of strategy depends, in large part, upon the skills of the licensee. As such, the licensor may want to retain the ability to alter its sales strategies in the market, including the option to make a direct investment, either in the form of a wholly owned operation or as a more formal joint venture, with the licensee or a new partner.

Neutralizing and Blocking Patents

A firm may develop technology that, if properly exploited, might conflict with the existing patent rights of other firms. In those cases, the firm may consider entering into a cross-licensing agreement with the firms holding the blocking patents in order to ensure that the technology can be utilized to its fullest extent without concern about an infringement action. An arrangement of this type may be quite expensive, and the firm should investigate the possibility of blocking patents before any significant amount of resources are expended on research and development activities. Moreover, cross-licensing arrangements raise a number of antitrust issues, depending upon the size of the market and the relative positions of the firms.

Local Regulatory Requirements

In order to enter a new foreign market, licensing, rather than direct investment, may be necessary in order to satisfy local customs and to comply with any governmental decrees regulating the participation of foreign firms in a specific market. For example, a number of countries have enacted laws to encourage development and expansion of local industry and reduce the degree of dependence on the use of imported technology. In such cases, licensing will be the only way to penetrate the local market, since any direct investment by foreign firms in those industrial sectors targeted for “self-sufficiency” will be limited or restricted. Moreover, even in those cases where a firm is permitted to make a direct investment, it may be prudent to enter into various license agreements that provide access to existing distribution channels of local firms, many of whom may receive, directly or indirectly, some form of government assistance.

Protection of Intellectual Property Rights

Licensing may be required in order to preserve the protection of inventions and other items under the intellectual property laws of a number of foreign countries. For example, many countries will require that the holder of a patent granted under local law must actually work or exploit the patented invention in the local market or forfeit the exclusive rights generally associated with the grant of a patent. In such cases, the holder of the patent will license a local firm to work the patent in order to avoid any action by the local authorities to grant a compulsory license of the patent to local firms, thereby severely undercutting the value of the patent rights to the original inventor.

Cost Reduction

Licensing is now a common strategy for firms seeking to control or reduce their manufacturing costs with respect to any new products that utilize technology developed by the firm. In recent years, firms have licensed foreign firms to manufacture products at a fraction of the cost that would be incurred by the licensor. A strategy of this type allows the firm to maintain its market share, lower its overall costs, and improve its margins, while avoiding the need to constantly reconfigure and rehabilitate its own production capabilities.

Enhancing Cash Flow and Harvesting

While licensing agreements are usually entered into for at least one of the broader strategic reasons above, it often makes sense to grant a license simply to generate additional cash flow from the technology in the form of royalties and fees. These types of licenses are particularly appropriate when the firm is seeking to “harvest” its previous investment in a given area and has no further desire to continue with development work, perhaps due to the costs associated with keeping up with new technologies or a broader change in the strategic objectives of the firm.

Just as it is essential to understand the specific goals and objectives pursued within the licensing strategy, notice needs to be taken of the various disadvantages to the licensor and the licensee that may arise out of the relationship. Obviously, licensing, like any other form of strategic business relationship, creates a material degree of interdependence between two firms with distinct cultures and business objectives. However, certain other factors must also be considered, including the very real possibility of creating a new competitor.

Except for the situation where the license is granted as a part of the licensor’s harvesting strategy, a license arrangement is generally chosen when it fulfills a specific strategic need of one or both of the parties. For example, a licensor may enter an arrangement with a licensee to distribute the licensor’s products in a specified market when the licensor believes that it would be too costly or risky for the licensor to attempt to engage in any direct sales efforts in the market. Accordingly, the licensor is dependent upon the licensee to assist the licensor in recovering its initial investment and achieve acceptable market acceptance for its products. As such, a good deal of care must be taken by the licensor in selecting the licensee, since any mistakes made by the licensee may lead to a loss of the market opportunity to another firm or a reduction in revenues such that the entire investment in the development cannot be recovered.

Both of the parties to a prospective licensing agreement should carefully investigate the relevant skills and resources of the other party. For example, a licensor seeking a distribution partner must understand both the technical and marketing capability of the potential licensee in order to determine the likelihood that the distributor will be able to achieve the required level of sales over the term of the arrangement. In addition, an effort should be made to determine whether the marketing efforts of the distributor will be compatible with the perceived quality of the products of the licensor. Finally, the licensor will want to make sure that it will not be called upon to expend an inordinate amount of effort in providing technical assistance to the licensee, since the hidden costs associated with this type of activity may reduce the overall benefits from the arrangement.

The risks and uncertainties of dependence on the performance of the other party to the licensing arrangement can be particularly acute when the parties differ substantially in size and maturity. For example, a start-up firm with a single new product may well be forced to rely on the manufacturing and distribution capabilities of a larger, established firm in the industry.

Many Utah businesses have grown significantly using licensing agreements. Your business too can benefit significantly by using licensing agreements. An experienced and seasoned Magna, Utah corporate lawyer can provide you with invaluable advice when it comes to growing your business using licensing agreements. The lawyer will ensure that you get the best deal from the licensing agreement.

Magna Utah Corporate Lawyer Free Consultation

When you need legal help with your business, corporation, nonprofit, LLC, or partnership, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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Corporate Attorney

Corporate Attorney

Oftentimes people wonder whether they need a corporate attorney to help them with a case.  If you have a corporation, limited liability company (“LLC”), partnership, or other entity, you may need corporate counsel.

Corporation

A corporation is a legal entity apart from its owners (shareholders).  Corporations can establish credit, acquire assets, and enter into contractual engagements. Potential liabilities are incurred by the corporation, not by the owners themselves.  This means that the personal assets of officers and shareholders are usually safe from the corporation’s creditors.  However, if shareholders fail to follow corporate formalities, a court may “pierce the corporate veil”, allowing creditors access to personal property. Owners of corporations don’t pay tax on the corporation’s earnings unless they actually receive the money as dividends or as compensation for services (e.g. salaries and bonuses).  The corporation itself pays taxes on all profits left in the business.

Benefits of a Corporation

  • First and foremost, there is limited liability for shareholders.  This perk attracts investors, as an investor’s liability and exposure is limited to the amount of his or her investment – less risk! This makes raising capital for your corporation less challenging.
  • Forming a corporation also increases the credibility of your company, and provides an opportunity for prestige among business and corporate officers.
  • Finally, corporations have several tax, compensation and wage benefits.

Detriments of a Corporation

  • You have to observe corporate formalities.  These are the basic operating rules that are necessary to ensure that the corporation maintains its status as a separate legal entity.  Some of the formalities include appointing officer positions, electing a board of directors, proper documentation of the corporation’s activity, annual meetings, etc.
  • Reaching corporate status is not a monumental task, but one must be sure to ensure the process is done correctly.
  • Another downfall is that a corporation goes through double taxation.  A traditional corporation must pay tax on all corporate income, followed by individual shareholders paying income taxagain on whatever distributions they received. One way to avoid the double taxation dilemma is to establish the corporation as a “pass through” entity.  This way all corporate profits pass through to the individual shareholders, so they alone will be responsible for the tax burden.  When a corporation elects to be treated this way, it becomes known as an “S” Corporation, which is discussed below.

Nonprofit Corporation

Nonprofit organizations are formed in the state where they intend to do business. Unlike a standard corporation, nonprofits do not conduct activities for the financial gain of shareholders.  Preventing the distribution of profits to members/shareholders is what distinguishes the nonprofit from a commercial enterprise; yet nonprofits still provide asset protection and limited liability.  A nonprofit corporation is not forbidden from making a profit — but if it does, that profit can only be used to further the overarching goal or mission of the organization.  Nonprofits can also trade at a profit and accept, hold and disburse money; but all profit and things of value are to be used to further the nonprofit’s quest.   Nonprofits are organized in many different ways: charities, service organizations, trusts, hospitals, universities, foundations, endowments and cooperatives can all operate as nonprofits.  Nonprofits can have “members”, although many do not.  They may have employees, and can compensate their directors reasonably, but only if compensation is documented ever-so-carefully.

Benefits of a Nonprofit

  • Nonprofit corporations generally have tax exempt status.
  • Once the recognized nonprofit entity has been formed at the state level, the nonprofit corporation can seek tax exempt status by applying to the IRS.  The IRS, after reviewing the application to ensure the purpose of the organization meets certain conditions, will issue an authorization letter granting it tax exempt status for income tax purposes. The exemption does not apply to other federal taxes such as employment taxes. Charitable contributions made to nonprofit organizations by individuals and corporations are also deductible.

Detriments of a Nonprofit

  • The reliability by which a non-profit organization can hire and retain staff, sustain facilities, or create programs is an ongoing problem.  Because nonprofits generally rely on external funding, they do not have much say over their precious sources of revenue.  This leads to reliance on government funds such as grants, contracts, vouchers or tax credits to support their operations.

Free Consultation with a Utah Corporate Attorney

If you are here, you probably have a business law issue you need help with, call Ascent Law for your free business law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

Ascent Law LLC

4.9 stars – based on 67 reviews


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