Macrotech, Inc., devel-ops an innovative computer chip and obtains a patent on i

Question

Macrotech, Inc., devel-ops an innovative computer chip and obtains a patent on it. The firm markets the chip under the trademarked brand name “Flash.” Macrotech wants to sell the chip to Nitron, Ltd., in Pacifica, a foreign country. Macrotech is concerned, however, that after an initial purchase, Nitron will dupli-cate the chip, pirate it, and sell the pirated version to com-puter manufacturers in Pacifica. To avoid this possibility, Macrotech could establish its own manufacturing facil-ity in Pacifica, but it does not want to do this. How can Macrotech, without establishing a manufacturing facility in Pacifica, protect against Flash’s being pirated by Nitron? (See Doing Business Internationally .)

Explanation / Answer

The best option to do this would be through Licensing. I present my views for licensing here:-

a) M will have an opportunity to enter in foreign business without foreign direct investment.

b) They will get royalities paid by N.

c) International businesses benefit from sharing knowledge and skills with the foreign country to earn goodwill and political capital.

d) Direct business , which is establishing a manufacturing site will have risks of international law, low market knowledge, uncontrolled spending, recruiting people.

Hence it is best for M to license its product to N.

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