Question

You recently entered into a licensing agreement with Wilson Sporting Goods to manufacture and distribute their footballs, basketballs, and volleyballs in Asia. They will provide you permission to use their name, manufacturing specifications, and marketing designs. You will build and maintain the factory overseas. Wilson gains several advantages by entering this agreement with you. What is the key disadvantage for Wilson Sporting Goods?

Answer 1

Answer:

The key disadvantage for Wilson Sporting Goods could be the loss of their intellectual property due to the amount of information that has been granted to the licensee such as the manufacturing specifications and marketing design. By so doing, Wilson Sporting Goods may just have created a competitor for itself.

Explanation:

A licensing agreement is one that occurs between a licensor (company that owns a brand) and licensee, in which the licensor grants the licensee permission to use its trademark, copyright, manufacturing processes and other intellectual property. The licensee then pays the licensor a percentage of its revenue.

As the factory would be built and maintained overseas, it difficult for Wilson Sporting Goods to monitor how the licensee uses the license so there is no infringement on its rights.