According to the Procedure on registration of the licensing agreement and other agreements related to the use of intellectual property, the Licensing agreement is a written agreement on the temporary use of an invention, product design, utility model, or trademark by another person. To be valid in the territory of Mongolia, the Licensing agreement for patent and trademarks shall be registered in the Intellectual Property Organization on mandatory basis; other agreements related to the use of intellectual property shall be registered on a voluntary basis.

General provisions of the Agreement shall be agreed by the Parties by negotiations and the followings can be considered during the negotiation of the Licensing agreement:

  1. It is important for the Parties to have a common understanding of the terminologies and definitions of the agreement as a separate section or article within the Agreement in order to avoid using them in different meanings and prevent disputes between the Parties on elaboration of meaning. This section shall include, for example, meanings or legal definitions like "invention', "licensed technology", "licensed product", "technical documentation" etc.
  2. Depending upon types of licenses, form and scope of use of the object under the license, the form and scope of use of the invention shall be determined clearly. For the use of invention, utility model, and industrial designs, according to paragraph 1 of article 51 of the Patent Law of Mongolia, there are two types of licenses that can be given to the Licensee: exclusive and simple. Exclusive licensing agreement is an agreement that is concluded by the patent owner/Licensor/ on the conditions that the license shall not be used by a third party at the same time. Simple licensing agreement is an agreement that is concluded by the patent owner on the conditions that the patent is not restricted to be used by a third party at the same time.For the use of a trademark, the type of the license is not provided. The exclusive trademark holder right will be granted after registration of the trademark at the Intellectual Property Organization.
  3. Basic rights and obligations of the Parties: The basic right of the Licensee is using the object (including industrial design or trademark) of the Licensing Agreement within certain limitation /entirely or partially/ in the stated form /production, use, sale/ and using in the defined territory / in where the patent or trademark is valid/. The possibility of concluding a dependent licensing agreement /dependent license/ is a simple license issued by the exclusive Licensor to a third party on agreed terms to the Licensee for use.

The main obligation of the Licensee is to pay (the amount and procedure for payment must be specified in a special article) agreed fee of using the object (which is included in the Licensor's obligation).

For patent licensing agreement: There are two basic forms of payment for patents transferred under the Licensing agreement: a lump sum payment or royalty fee. In addition, technical assistance fees shall be charged separately. Also, there can be a combination of lump sum and royalty fee.

  1. The lump sum payment is made in one lump sum or in several installments within a certain period of time by concluding the licensing agreement with the full transfer of the right to use the invention or patent. The lump sum payment is usually used when the main invention under the Licensing agreement is relatively simple and the Licensee is able to use the invention or trademark directly in production and then sell it.
  2. In the case of royalty fee, it is important to specify the principle of determining the percentage to be paid in detail. The amount of the royalty fee shall be calculated based on the amount of product produced, the price of the product or the earned profit.

For trademark licensing agreement: The Parties may agree to one or more of the following fees under trademark licensing agreement.  

  1. License Issue Fee. The initial payment by the Licensee for the right to the license of the Licensed Trademark. This payment shall be paid after execution of Licensing agreement by the Parties.
  2. Royalties. Essentially, the Licensee will pay a percentage of every sale it makes on Licensed Services or Products to the Licensor. The Party can change this to be a per-unit royalty (i.e., a set fee every time a sale is made) or make the percentage rate variable over the Term (e.g., increasing over the Term based on an assumption that sales will increase over time). This is a matter of negotiation between the Parties.
  3. Minimum Royalty. To make sure the Licensor receives at least something every year in exchange for its agreement to license its marks. This type of fee establishes a minimum required annual payment. Note that if this payment is not made, the Licensor has the right to terminate the Agreement. In the second option, the Licensor will receive a set payment in exchange for the license it provides.
  4. The main obligation of the Licensor is to issue a license to the Licensee in an agreed form, with all the necessary technical documents especially for patent or industrial design, which shall be stated or included in an Appendix of the Licensing Agreement. Under the Licensing Agreement, the Licensor's special obligation is to provide technical assistance to the Licensee in regards with use of inventions, utility models and industrial designs.
  5. Technical assistance includes training and consulting (on technical operation, services, trade and marketing, management, planning, research) on use of the trademark as well as the provision of the necessary equipment and materials on use of the patent. The size, conditions and form of payment for training and consultations shall be determined and charged separately. The payment for training and consulting is usually borne by the Licensee.
  6. Termination of the Agreement. The Parties may terminate the Licensing Agreement both unilaterally and bilaterally. Since the legislation does not contain special rules on liability and termination of agreement in relation to the Licensing Agreements, these rules shall be governed by the Civil Code of Mongolia.
  7. Dispute resolution. All disputes arising in connection with the Licensing agreement shall be resolved within 3 months by the Dispute Resolution Commission (hereinafter "the Commission") of the Intellectual Property Organization, then the Party, which disagrees with the decision of the Commission has the right to file a complaint to the court within 30 days from the date of the decision of the Commission.

Registration of the Licensing Agreement.

The Intellectual Property Organization registers the Licensing Agreements and enters the information of the Licensing Agreements into the database. The following documents are required for registration:

  • application form L-1, L-2;
  • the original agreement related to the invention, product design or utility model, or a notarized copy of the agreement;
  • a notarized copy of the relevant part of the Agreement related to the trademark or a statement signed and certified by the licensor and licensee;
  • basic license agreement for a sub-license;
  • translation;
  • power of attorney;
  • a statement that each co-owner, who is not a party of the license agreement, has agreed to and signed the license agreement;
  • receipt of state stamp duty and service fee payment.

The applicant shall submit all necessary documents online or in person to the Intellectual Property Organization. Within 10 days after the submission of the documents, the Intellectual Property Organization notifies the applicant about the registration of the Licensing Agreement for Patent and Trademark. However, if the documents submitted by the applicant are incomplete or do not meet the requirements, then the applicant will have 20 days to eliminate the incompleteness and resubmit the documents.

Also, in accordance with Mongolian legislation, it is necessary that all changes or additional agreements, as well as termination of the Licensing Agreement on patent and trademark, shall be registered in the Intellectual Property Organization.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.