In: Business and Management

Submitted By aeonlala90
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For licensees, the principal advantage of a license (typically referred to as a "license-in") is that it allows the licensee to use proven technology in its business in exchange for paying the license fee, rather than incurring the full cost of developing and maintaining the technology. If the licensee's business is relatively complex and involves a variety of different technologies, which would be difficult and costly for the licensee to develop on its own, then the licensee will probably need a number of "licenses-in."
The principal disadvantage of licenses-in is that they can cause the licensee to become technologically dependent on the licensor, which could lead to a variety of problems when the time comes to renew the license. The licensor could use its leverage to negotiate better terms. Or, if another party has offered the licensor more money in exchange for an exclusive license, then the licensor might refuse to license the technology to the licensee. Even if the license-in is a perpetual license, which does not need to be renewed, the licensee is still at risk. The licensor could license the same technology to one or more of the licensee's competitors, thereby giving them the same competitive advantage that the technology provides to the licensee. In addition, the licensor could fail to maintain or update the technology, thereby diminishing its value.
From the licensor's perspective, a license is referred to as a "license-out." The principal advantage of a license-out is that it allows the licensor to realize a return on its technology without incurring the expense involved in actually manufacturing, marketing, distributing, and selling a product. If a licensor has technology that is unrelated to its core business, then it can use a license-out to realize some value from the technology, without being…...

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