Same mark, same Vietnamese market, yet the value of a licence contract can multiply several times over because of one word: ‘exclusive’. Many FDI companies sign group templates without realising that Vietnamese law defines an exclusive licence more strictly than international practice: even the trademark owner is locked out. This article draws the line between the two licence types under Article 143 of the IP Law and the practical consequences of each choice.
The Article 143 definitions: Vietnamese ‘exclusive’ also excludes the owner
Article 143 of the IP Law divides contracts for use of industrial property objects into three types. An exclusive contract is one where, within the licensed scope and term, the licensee has the exclusive right to use the object; the licensor may not sign a use contract with any third party, and the licensor itself may use the object only with the licensee’s permission. In other words, Vietnamese ‘exclusive’ merges the two exclusion layers that Anglo-American practice separates into exclusive and sole licences: third parties are excluded, and so is the owner.
A non-exclusive contract is the mirror image: the licensor keeps the right to use the object itself and to grant further non-exclusive licences to others. The third type is the sub-licence, where the licensor is itself a licensee under another contract; under Article 142 a licensee may only conclude a sub-licence with the licensor’s permission, so chains of sub-licences cannot form spontaneously where the head contract does not open the way.
Comparing the practical consequences on four axes
On in-market competition: an exclusive licence gives the licensee its own ‘playing field’ within the agreed scope and term, suiting cases where it invests heavily in building the market; a non-exclusive licence keeps the market open, with several licensees possibly operating in parallel. On the owner’s own trading: under an exclusive contract, the owner needs the licensee’s permission even to sell its own branded goods within the licensed scope; under a non-exclusive contract the owner is entirely free on this axis.
On enforcement standing: an exclusive licensee stands closer to the owner in pursuing infringements within its exclusive scope, while a non-exclusive licensee usually has to act through the owner. On strategic flexibility: non-exclusive structures are easy to adjust and extend to new partners; exclusive structures lock the market architecture for the whole term, making termination clauses, minimum performance clauses and step-down clauses (loss of exclusivity for missing targets) critical.
When exclusivity is worth it, and when non-exclusive suffices
An exclusive licence fits where the licensee must commit large, long-term investment to develop the market (building distribution, obtaining product registrations, funding marketing) and needs protection from competition by the owner and other licensees during the payback period; or where the group organises Vietnam through a single gateway entity. The price of exclusivity is that the owner gives up self-exploitation and renegotiation leverage for the whole term.
A non-exclusive licence fits multi-distributor models split by region or product line, franchise systems with many operators, or market-testing phases where the owner will not yet lock in commitments. A widely used middle structure is bounded exclusivity: exclusive by product line or sales channel, by a narrower territory, or exclusive for an initial period conditioned on minimum sales, converting automatically to non-exclusive if targets are missed. Remember that all such limits must be written into the contract among the essential contents listed in Article 144; oral understandings do not count.
Licence fees: why exclusive costs more, and by how much
The law fixes no fee level for either licence type; fees are pure negotiation. Economically, an exclusive fee is higher because it must compensate the owner for two things: the self-exploitation revenue the owner gives up, and the opportunity to license others that is closed off for the term. The actual premium depends on brand strength, the size of the exclusive market, the term and the licensee’s committed investment; there is no standard percentage applicable across industries.
In negotiation, avoid fixating on the royalty rate alone: an effective fee structure usually combines an upfront fee, a running royalty on revenue with an annual minimum guarantee, and an adjustment mechanism for material market changes. For intra-group licences between a foreign parent and its FDI subsidiary, the fee is a related-party price that must satisfy the arm’s length principle, with contractor tax on royalties paid offshore, so ‘high or low’ is no longer entirely at the signing parties’ free discretion.
Frequently Asked Questions
What is the difference between exclusive and non-exclusive licences?
Under Article 143 of the IP Law, an exclusive contract gives the licensee sole use within the agreed scope and term: the owner may not license any third party, and the owner itself may use the object only with the licensee’s permission. Under a non-exclusive contract, the owner keeps using the object itself and may grant further non-exclusive licences to others.
When should an exclusive licence be chosen?
When the licensee must invest heavily and long-term to develop the market and needs protection from competition by the owner and other licensees during payback; or when the group wants a single gateway entity in Vietnam. In exchange, the owner loses self-exploitation for the term, so minimum sales clauses and mechanisms to shrink exclusivity for underperformance become essential.
Does an exclusive licence stop the trademark owner from using its own mark?
Yes. This is a notable feature of Vietnamese law: in an exclusive contract under Article 143, the licensor may use the industrial property object only if the licensee permits it. Many international templates assume the owner keeps using its own mark; using such a template unadjusted in Vietnam is a recipe for serious misunderstanding between the parties.
How much higher is an exclusive licence fee?
There is no statutory rate and no market ‘standard’ percentage. The exclusive fee is higher because it compensates the owner for forgone self-exploitation revenue and for the licensing opportunities locked away; the actual premium depends on brand strength, the size of the exclusivity, the term and the licensee’s investment commitments. Fee structures usually combine an upfront fee with a running royalty subject to an annual minimum.
FLAT reviews group licence templates before they are signed in Vietnam, aligns the exclusivity definition with Article 143, and designs fee structures and minimum-performance clauses that protect both sides.
This article has been quality-reviewed by the FLAW AI Legal Council