What is an Exclusive License Agreement?

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The exclusivity of an agreement is an important part of negotiating any business deal and plays a large role in licensing agreements and distributorship agreements.  Making a distributorship agreement exclusive means that only the distributor with the exclusive right may sell the products.  Similarly, an exclusive license means that only the licensee can use the license.  This exclusivity provides a major business advantage, ensuring that the exclusive distributor or licensee will not face any competition from other companies distributing the same product or using the same license.

Because exclusivity is such a powerful business tool, many companies choose to either sign non-exclusive agreements or limit the exclusivity in geographic or temporal terms.  For example, a product manufacturer might sign a contract with one company to be the exclusive distributor in America and sign a different contract with another company to be the exclusive distributor in Japan.  Or the exclusive license to a patent might be limited to one year, after which the patent may be licensed by multiple parties.

When negotiating a business deal it is important to consider the benefits of exclusivity and both parties should be well aware of the rights they are gaining or giving up as part of the deal.  If you have any questions about contracting in Japan, please contact our office to set up a legal consultation.