Licensing: Licensing is a business alliance, wherein a company authorizes another company by issuing a license to temporarily access its intellectual property rights, i.e. manufacturing process, brand name, trademark, patent, technology, trade secret, etc. for adequate consideration and under specified conditions.
Foreign entities are generally not restricted from establishing entities neither in India nor in USA, provided that they comply with state registration requirements.
you can commence your business either by way of a joint venture or foreign direct investment (FDI) or by establishing a liaison office in India. The government has opened some sectors to automatic foreign participation while in others approval is required and in certain other sectors, equity participation is capped. Similarly, the foreign licensor can establish a liaison office in India subject to meeting the guidelines issued by the Ministry of Commerce. Approvals are required from the government for reserved industries such as the chemical industry, defense, etc.
Any inflow and outflow of funds between an international franchisor and an Indian franchisee are regulated by the Foreign Exchange Management Act 1999 (FEMA) and the rules set out thereunder. As per the Foreign Exchange Management. Rules 2000 the prior approval of the Reserve Bank of India (RBI) is required for making remittance outside India for use or purchase of a trademark (rule 5 read with Schedule III(16)).
Foreign companies may appoint licensees in India to sell their products as per the terms of the license agreement. Licensees typically pay fees to the licensor by way of royalty and technical know-how fees. Until 2009, as per the guidelines of the government of India, royalty payments at the rate of 8% on exports and 5% on domestic sales and a lump sum payment not exceeding the US $2 million (in the case of technology transfer) could be paid directly through an authorized dealer. but where there was no technology transfer involved, a royalty up to 2% for exports and 1% of domestic sales was allowed under an automatic route on the use of trademarks and brand names of the foreign collaborator.
similarly in the USA, you can easily start your journey from entering into license agreements, even if they do not establish an entity in the United States, provided that they are not subject to a trade embargo.
However, the Bureau of Export Administration, Dept. of Commerce, Dept. of State, Dept of Energy, Dept of Agriculture, regulate the exportation and importation of certain articles. License agreements with foreign entities must comply with agency requirements. Further, license agreements must also comply with the tax provisions of the United States as well as any international treaties.
Also, the Committee on Foreign Investment in the United States (CFIUS) reviews certain transactions involving foreign investment in the United States to determine the effect of such transactions on the national security and integrity of the United States.
On 13 August 2018, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) was signed into law and expands the jurisdiction of CFIUS to cover four new types of transactions:
Additionally, the President of the United States can block the acquisition of a US company, although such occurrences are rare.
As licensing arrangements to offer major commercial benefits to business organizations and inventors, it is to be given to the details which go into the licensing agreement. Furthermore, in the light of the above, it is imperative to comply with all the applicable laws about licensing regime.
This is all about the Licensing of India and the US, and I hope this is helpful for you.