Franchising a store chain, allowing a partner to manufacture products bearing your trademark, transferring technological know-how to a contract manufacturer — all of these run on intellectual property licence agreements. This is the type of contract where one carelessly drafted clause can cause a business to lose control of its own assets, or conversely, cause the licensee to pay for a right that cannot be enforced.
This article analyses the legal framework: distinguishing licences from assignments, types of licences, required form and content, prohibited clauses, effect against third parties, and registration procedures.
Quick summary
| Item | Key information |
|---|---|
| Nature | The owner permits others to use the IP subject matter within the agreed scope, without transferring ownership |
| Form | Must be in writing |
| Effect between the parties | As agreed (except assignments, which take effect only upon registration) |
| Effect against third parties | Must be registered at IP Vietnam — except trademark licence contracts |
| Types | Exclusive, non-exclusive, sub-licence |
| Key point | Define the scope of the licensed rights correctly; register the contract when needed to assert against third parties |
Legal basis
- Law on Intellectual Property No. 50/2005/QH11, as amended and supplemented by Law No. 36/2009/QH12, Law No. 42/2019/QH14 and Law No. 07/2022/QH15 (effective from 01/01/2023).
- Articles 138–140 (assignment of industrial property rights), Articles 141–148 (contracts for the use of industrial property subject matter), Articles 149–150 (registration of transfer contracts) of the Law on Intellectual Property.
- Decree No. 65/2023/ND-CP detailing industrial property.
- The 2015 Civil Code (general contract provisions); the 2005 Commercial Law (commercial franchising); the 2017 Law on Technology Transfer (technology transfer).
Assignment and licensing — two different transactions
Many businesses confuse these two concepts and pay dearly. Assignment is the owner transferring the entire ownership of the industrial property subject matter to another party — an outright “sale”. After assignment, the assignor retains nothing (unless otherwise agreed). Licensing is merely permitting another party to use the subject matter within a defined scope and term — a “lease”. The owner keeps ownership and may continue exploiting the asset or licensing it to other parties.
The legal consequences differ fundamentally. For industrial property rights established on the basis of registration, an assignment contract takes effect only upon registration (Article 148(1)). Meanwhile, a contract for the use of industrial property subject matter takes effect as agreed between the parties — registration is not a condition of validity, but only relates to its effect against third parties.
Types of licence agreements
Exclusive licence: within the agreed scope and term, only the licensee may use the subject matter — even the licensor (owner) may not use it within that scope, unless it reserves the right. This type carries the highest value and usually comes with large royalties and minimum sales commitments.
Non-exclusive licence: the licensor may still use the subject matter and license it to other parties. Common in software licensing and trademark licensing to multiple distributors.
Sub-licence: the licensee is permitted to further transfer the right of use to third parties, within the scope of the rights it enjoys. The sub-licence right must be expressly agreed — it does not arise automatically.
In practice there are also hybrid variants: exclusive by territory, limited by field of use. Define the scope clearly along three axes: territory, time and field of use.
Form and content of the agreement
A contract for the use of industrial property subject matter must be in writing. Article 144 prescribes the main contents: names and addresses of the parties; the basis of transfer (protection certificate number or information identifying the subject matter); scope of transfer; transfer price (licence fees, calculation method, payment terms); contract term; rights and obligations of the parties; liability for breach of contract.
Beyond the statutory list, a well-drafted licence agreement needs more: quality standards and the licensor’s quality inspection rights; confidentiality obligations (for know-how licences); sub-licence rights; provisions for when the certificate is terminated; dispute resolution mechanisms.
Prohibited clauses — unreasonable restrictions on competition
Article 144(2) lists clauses in contracts for the use of industrial property subject matter that are automatically void for unreasonably restricting competition, including: prohibiting the licensee from improving the subject matter (except for trademarks); forcing the licensee to transfer its improvements to the licensor free of charge; unreasonably restricting the licensee’s rights.
This is where technology businesses often stumble: clauses such as “all improvements by the licensee belong to the licensor” or “no research and development in related fields” risk being declared void. Grant-back and non-compete clauses must be designed within the bounds permitted by law and with commensurate consideration.
Effect of the agreement and registration against third parties
Article 148(2) and (3) (amended in 2019 to conform with the CPTPP) provide: for industrial property rights established on the basis of registration, a contract for the use of industrial property subject matter takes effect as agreed between the parties. However, such contract — except trademark licence contracts — has legal effect against third parties only when registered at the state authority for industrial property rights.
In other words: unregistered, a patent or industrial design licence still binds the two signatories, but cannot be asserted against third parties. Trademark licence contracts are exempted from this registration requirement under the CPTPP commitment (Article 18.27) — but registration is still recommended for transparency and ease of proof.
The dossier for registering a contract at IP Vietnam includes: the declaration in the prescribed form; the original or valid copy of the contract; the original protection certificate (in the case of assignment); written consent of co-owners (if the right is co-owned); fee payment receipts; a power of attorney if filed through a representative (Article 149).
Termination of licence agreements and licensing copyright
Apart from the general grounds for contract termination (expiry, agreed termination, material breach), IP law has a special rule in Article 148(4): a contract for the use of industrial property subject matter automatically terminates if the licensor’s industrial property right is terminated.
The practical consequence: if the licensor’s certificate is invalidated or its validity terminated (no renewal, no maintenance fees paid), the licence agreement automatically ends. The licensee should therefore check the certificate’s status before signing, include the licensor’s obligation to maintain validity, and provide mechanisms for when the certificate lapses mid-term.
For trade secret licences, the logic is reversed: the contract should provide that the recipient’s confidentiality obligations survive termination — because disclosed information cannot be “taken back”.
Copyright is also a licensing subject matter: software licences, licences to use musical works and images in advertising, licences for training content. The transfer of the right to use property rights and the right of publication must be in writing and should be registered at the Copyright Office for ease of proof in disputes.
The difference from industrial property licences: copyright arises automatically, so there is no “certificate” to check; the licensee must scrutinise the licensor’s standing more carefully — through registration certificates (if any), chains of assignment contracts, employment/commissioned creation contracts. Many software licence disputes stem from the licensor not actually being the lawful owner. See our article on copyright registration in Vietnam.
Common risks and how to prevent them
Scope of rights not clearly defined. “Permitting use of the trademark” without specifying territory, time and product groups — in a dispute, each party understands it differently. Always define the scope along three axes: where, how long, and for what use.
The licensor does not actually hold the rights. Licensing an expired patent, a trademark under dispute, or software the licensor does not own — verifying the legal status before signing is an indispensable step.
Not registering the contract when needed. Unregistered patent or industrial design licences cannot be asserted against third parties.
Anti-competitive restriction clauses voided. Prohibiting improvements, forcing free transfer of improvements, unreasonable restrictions — these clauses are automatically void under Article 144(2).
Lack of quality control mechanisms (trademark licences). The licensee producing poor-quality goods damages the brand — harm that money can hardly fix.
What FLAT LAW FIRM does
FLAT LAW FIRM drafts, reviews and negotiates all types of licence agreements: trademark licences (including commercial franchising), patent licences and technology transfers, trade secret/know-how licences, software and digital content licences. We assist with verifying the legal status of the subject matter before the transaction and registering contracts at IP Vietnam.
Frequently asked questions
Must a licence agreement be registered at IP Vietnam?
Not mandatory for validity between the parties — a contract for the use of industrial property subject matter takes effect as agreed. However, except for trademark licence contracts, the contract has legal effect against third parties only when registered (Article 148(2), (3)). For high-value transactions or future assignments, registration is advisable.
How do assignment and licensing differ procedurally?
Assignment of industrial property rights (established on the basis of registration) takes effect only upon registration at the state authority for industrial property rights (Article 148(1)) — an outright “sale” of the rights. Licensing (permitting use) takes effect as agreed between the parties; registration is only needed to assert against third parties (except trademark licences).
May a licensee further transfer the rights to a third party?
Only if the contract agrees on sub-licence rights. This right does not arise automatically. The contract should state clearly whether the licensee may sub-license, within what scope, and whether the licensor’s consent is required.
What happens to the licence agreement if the licensor’s certificate expires?
The contract automatically terminates if the licensor’s industrial property right is terminated (Article 148(4)). The licensee should check the certificate’s status before signing, include the licensor’s obligation to maintain validity, and provide mechanisms for when the certificate lapses mid-term.
Is a clause prohibiting the licensee from improving the technology lawful?
It risks being declared void. Article 144(2) lists automatically void clauses that unreasonably restrict competition, including prohibiting the licensee from improving the subject matter (except trademarks) and forcing free transfer of improvements. Grant-back and non-compete clauses must be designed within the bounds permitted by law.
