What is an exclusive licence agreement?

An exclusive licence agreement grants the licensee the sole right to use specified intellectual property within a defined scope — territory, product category, or industry — typically excluding even the licensor from exercising those rights in that scope. An exclusive licence is more valuable and commands higher royalties or upfront fees than a non-exclusive licence, where the licensor can grant the same rights to multiple licensees simultaneously.

Licensing vs Distribution Agreements: Complete B2B Guide

Q: Can a distribution agreement include a licence?

Yes — and this is common in practice. A distribution agreement frequently includes a limited licence for the distributor to use the supplier's trademarks, logos, and brand assets for marketing and sales purposes in the assigned territory. This trademark licence is typically restricted to use in connection with the authorised products and terminates automatically when the distribution agreement ends.

Two of the most widely used — and most frequently confused — commercial agreements in international B2B trade are the licensing agreement and the distribution agreement. Both allow a company to extend its commercial reach beyond its own direct operations. Both involve a formal contractual relationship with an independent business partner. And both require careful drafting to protect intellectual property, revenue streams, and the brand’s market position.

But they are fundamentally different in purpose, structure, and commercial consequence. A licensing agreement is primarily an IP instrument: it grants rights to use, manufacture, or commercialise intellectual property. A distribution agreement is primarily a commercial instrument: it governs how a third party buys and resells physical or digital products. Understanding which structure — or which combination of structures — applies to your situation is one of the most commercially significant decisions a brand owner or manufacturer makes when entering a new market or scaling an existing one.

This guide explains both agreements comprehensively, compares them rigorously, walks through the essential clauses each must contain, and explains how finding verified partners through platforms like GT Setu’s international distributor network is the critical first step in making any licensing or distribution arrangement succeed.

💡 Who This Guide Is For

Brand owners and IP holders evaluating how to monetise or distribute their products internationally, manufacturers seeking distribution partners in new geographies, distributors wanting to understand what they are agreeing to, and legal and commercial teams drafting or reviewing either type of agreement.

⚖️ Legal Disclaimer

This guide provides commercial and strategic context for understanding licensing and distribution agreements. It is not legal advice. Always engage qualified legal counsel in the relevant jurisdiction before drafting, signing, or relying on any commercial agreement.

SECTION 1

1 Agreement Types at a Glance

Before diving into detailed explanations, here is a visual orientation across the principal agreement types you will encounter in B2B commercial partnerships — from pure IP licensing to physical product distribution:

Licensing Agreement

Grants the licensee rights to use the licensor’s IP — trademark, patent, technology, or formula. Licensor retains IP ownership and earns royalties.

🔐 IP Rights Granted

Distribution Agreement

Grants a distributor rights to buy and resell the supplier’s products in a defined territory. Distributor buys at wholesale and earns a margin on resale.

🚚 Product Resale Rights

EDA

Exclusive Distribution

Sole distributor rights in a territory. No other distributor — or the supplier itself — may sell those products there. Requires higher minimum commitments.

🏆 Territorial Exclusivity

ELA

Exclusive Licence

Sole right to use specified IP within a defined scope. Even the licensor is excluded. More valuable and higher royalty than a non-exclusive licence.

⭐ Exclusive IP Access

TML

Trademark Licence

Permits the licensee to use the licensor’s brand, logo, or trademark in marketing — typically embedded within a distribution agreement.

™ Brand Use Rights

SDA

Sub-Distribution Agreement

A master distributor grants sub-distribution rights to local partners. Common in large or complex territories where regional reach is required.

🌐 Tiered Distribution

📌 Why These Agreements Get Confused

In practice, distribution agreements frequently include embedded trademark licences — giving distributors the right to use the supplier’s brand in local marketing. This overlap causes confusion: is it a licence or a distribution agreement? The answer is usually both. Understanding which elements serve which legal and commercial purpose is essential to drafting an agreement that actually protects your interests.

SECTION 2

2 What Is a Licensing Agreement?

🎯 Definition

A Licensing Agreement is a legal contract in which the owner of intellectual property (the licensor) grants another party (the licensee) the right to use, manufacture, sell, or otherwise exploit that IP — within defined parameters of scope, territory, duration, and exclusivity — typically in exchange for royalty payments or a fixed licence fee. The licensor retains full ownership of the IP throughout. The licensee gains access and use rights but does not acquire ownership. If the licence terminates, the licensee’s rights to use the IP terminate with it.

Licensing is one of the most powerful tools for IP monetisation and market expansion. Rather than investing directly in foreign market infrastructure, a brand owner or technology developer can license their IP to a local company with existing market presence, manufacturing capability, and regulatory compliance — earning royalty income with minimal operational investment in the new market. This approach is particularly prevalent in pharmaceuticals, technology, consumer goods, media, and manufacturing.

For manufacturers operating under OEM or ODM models, licensing is often the IP mechanism that governs the relationship — the brand owner licences its design or trademark to the contract manufacturer or distributor as part of the commercial arrangement.

What Does a Licensor Actually Grant?

™️

Trademark Licence

The right to use the licensor’s brand name, logo, and trademarks in the defined territory and scope. Always subject to quality control provisions to protect brand integrity.

🔬

Patent Licence

The right to manufacture, use, or sell products protected by the licensor’s patents. Particularly common in pharmaceuticals, engineering, and technology hardware.

💾

Technology / Software Licence

The right to use proprietary software, platforms, algorithms, or technical processes. Common in SaaS, manufacturing technology, and enterprise software.

🧪

Formula / Know-How Licence

The right to manufacture products using the licensor’s proprietary formulas, recipes, or trade secrets. Common in food and beverage, cosmetics, and pharmaceuticals.

📖

Copyright Licence

The right to reproduce, distribute, or adapt the licensor’s creative works — books, music, software code, imagery, or other protected content.

🏭

Manufacturing Licence

The right to manufacture products to the licensor’s specifications and sell them — often under the licensor’s brand. Related to contract manufacturing arrangements.

Royalties

Primary revenue model for licensors — typically 2–15% of net sales depending on IP type and exclusivity

Full IP

Ownership always remains with licensor — licensee gains access, not title, to the IP

Quality

Control provisions are critical — licensor must specify standards to protect brand and IP integrity

Auditing

Royalty audit rights allow licensor to verify sales figures and ensure correct royalty payments

SECTION 3

3 Types of Licensing Agreements

Exclusive Licence

Grants the licensee the sole right to use the IP within the defined scope — even the licensor cannot exercise those rights in that territory or field. Commands the highest royalties and typically demands minimum performance commitments from the licensee.

📍 A pharmaceutical company giving one regional partner exclusive rights to manufacture its drug formula

Non-Exclusive Licence

The licensor can grant the same rights to multiple licensees simultaneously. Lower royalty rates reflect lower exclusivity value. Common for technology platforms and content licensing where broad adoption is the goal.

📍 A software company licensing its platform to multiple regional SaaS resellers simultaneously

Sole Licence

Only one licensee is appointed in a territory, but the licensor retains the right to also use the IP in that scope. A middle ground between exclusive and non-exclusive — only one external party has access, but the licensor is not excluded.

📍 A food brand appointing one licensee in a region but continuing to sell directly through its own channels

Cross-Licence

Both parties licence IP to each other simultaneously. Common between technology companies with overlapping patents, enabling both to use each other’s innovations without infringement risk or ongoing payment complexity.

📍 Two consumer electronics manufacturers cross-licensing their respective display and battery patents

Sub-Licence

The licensee is authorised to grant a portion of the licensed rights to a third party (sub-licensee). Requires explicit permission from the licensor and careful structural drafting to avoid uncontrolled IP proliferation.

📍 A master licensee in the GCC sub-licensing rights to local country partners in the UAE, Saudi Arabia, and Kuwait

Compulsory Licence

Granted by government authority without the IP owner’s consent — typically in pharmaceutical or public interest contexts. Allows generic manufacturing of patented products in defined circumstances.

📍 Government-issued compulsory licences for COVID-19 vaccine manufacturing in developing markets

SECTION 4

4 What Is a Distribution Agreement?

🎯 Definition

A Distribution Agreement is a commercial contract in which a supplier (manufacturer, brand owner, or wholesaler) grants a distributor the right to purchase the supplier’s products and resell them to end customers, retailers, or downstream trade partners within a defined territory and for a defined period. The distributor buys the products outright — taking title and bearing inventory risk — and earns its return through the margin between the price it pays the supplier and the price at which it resells. The distributor is not the supplier’s agent; it is an independent business buying and reselling on its own account. Critically, the supplier’s brand appears on the product throughout, which is why distribution agreements almost always include a trademark licence component.

Distribution agreements are the backbone of international market entry for manufacturers and brand owners. Rather than establishing their own sales force, warehousing, and regulatory compliance in each target market, suppliers partner with established local distributors who bring market relationships, logistics infrastructure, local regulatory knowledge, and capital to carry inventory. For a detailed guide on identifying and approaching international distributors, see GT Setu’s resource on finding verified international distributors.

What Does a Distributor Actually Do?

📦

Buys & Holds Inventory

The distributor purchases stock from the supplier, takes title and responsibility for the inventory, and manages warehousing in the territory — including associated capital and storage costs.

🏪

Sells to Local Trade

Distributor sells to retailers, wholesalers, and end customers in the assigned territory — using its own existing trade relationships and sales force that the supplier does not have locally.

🚛

Logistics & Last Mile

Handles import clearance, customs duties, local transportation, and last-mile delivery — removing the supplier from the operational complexity of in-country logistics.

📋

Regulatory Compliance

Manages local product registration, labelling compliance, and import licensing — critical in regulated categories like food, pharma, and electronics.

📣

Marketing & Promotion

Executes brand-approved marketing activities in the territory — trade promotions, retailer placements, and local advertising — typically under a co-marketing or MDF (marketing development funds) framework.

🔧

After-Sales & Service

Manages customer service, warranty claims, and product returns in the territory — protecting the supplier’s brand reputation without the supplier needing local service infrastructure.

✨ GT Setu Insight

Finding a qualified, credible distributor is the single most consequential decision in international market entry. GT Setu’s international distributor discovery network provides pre-verified distributor profiles across 100+ countries — with built-in NDA workflows so you can begin commercial discussions on a confidentiality-protected basis before sharing pricing, product specifications, or margin structures.

SECTION 5

5 Types of Distribution Agreements

Exclusive Distribution

One distributor holds sole rights in a defined territory. Neither the supplier nor any other distributor may sell to that territory’s customers directly. Highest commitment from both sides — distributor invests more; supplier gives up direct channel flexibility.

📍 A German medical device brand appointing one exclusive distributor for the entire GCC region

Non-Exclusive Distribution

The supplier can appoint multiple distributors in the same territory simultaneously and may also sell directly. Less commitment required from either party; more competition between channels. Common for commodity or FMCG products.

📍 A FMCG brand using multiple regional distributors across India simultaneously

Selective Distribution

The supplier appoints only distributors meeting defined qualitative criteria — technical capability, showroom standards, customer service levels, or minimum stock holdings. Balances coverage with brand quality control.

📍 A luxury consumer electronics brand allowing only certified, premium retail distributors to carry its products

Sole Distribution

Similar to exclusive, but the supplier retains the right to sell directly in the territory. Only one distributor is appointed, but the supplier does not fully exclude itself from the market — creating a slightly different competitive dynamic.

📍 A manufacturer appointing a sole regional distributor while maintaining a direct key account relationship with one large retailer

Sub-Distribution

A master or regional distributor is given rights to appoint sub-distributors in its territory — creating a tiered distribution structure. Common in large or geographically complex markets requiring localised penetration.

📍 A master distributor for Southeast Asia appointing country-level sub-distributors in Thailand, Vietnam, and Indonesia

Digital / E-Commerce Distribution

Governs a distributor’s right to sell the supplier’s products through online marketplaces, e-commerce platforms, and direct-to-consumer digital channels. Increasingly important as a separate agreement tier from physical distribution rights.

📍 A supplier appointing an exclusive e-commerce distributor for Amazon, Flipkart, and Noon across South Asia and the GCC

SECTION 6

6 Licensing vs Distribution: The Core Differences

The fundamental distinction between a licensing agreement and a distribution agreement is what is being transferred: in licensing, it is the right to use IP; in distribution, it is the right to buy and resell products. This single distinction cascades into very different commercial, legal, and operational structures.

💡 The One Sentence Distinction

A Licensing Agreement says: “You may use my IP — here is what you can do with it and what you owe me.” A Distribution Agreement says: “Buy my products at this price — then sell them in your territory and keep your margin.”

What Is Being Transferred?

A licence transfers IP usage rights — the right to use, manufacture, or commercialise intellectual property while the licensor retains ownership. A distribution agreement transfers product resale rights — the distributor buys physical products and resells them. No IP ownership or even usage rights are typically transferred; only product title passes when the distributor buys inventory.

How Does the Partner Earn Revenue?

Licensees earn revenue from the commercial exploitation of the licensed IP — selling products manufactured under the licence, using the licensed software, or operating under the licensed brand. Their fee to the licensor is a royalty on those revenues. Distributors earn revenue from the margin between the wholesale price they pay the supplier and the price at which they resell — their income is not paid to the supplier; it is retained from the difference.

Who Bears Inventory Risk?

In a distribution agreement, the distributor buys the inventory and bears full inventory risk — if products do not sell, the distributor absorbs the loss (subject to any return provisions in the agreement). In a licensing agreement where the licensee manufactures, the licensee bears production cost risk. Where a licensee is only granted sales rights under a licence (rarer), the IP royalty may still be owed even if sales underperform.

Who Controls Pricing?

In a licensing agreement, the licensee typically sets its own resale prices — the licensor controls royalty rates but not downstream pricing (with exceptions for quality positioning). In a distribution agreement, suppliers can provide recommended retail prices and may set minimum pricing floors to protect brand positioning, but cannot legally fix resale prices in most jurisdictions (resale price maintenance is often a competition law violation).

IP Protection Requirements

Licensing agreements require extensive IP protection provisions — scope of permitted use, quality control obligations (critical for trademark licences to maintain validity), and clear restrictions on sub-licensing or modification. Distribution agreements require more limited IP provisions — primarily a trademark licence for marketing use and brand guidelines. For guidance on secure B2B collaboration from first contact, see GT Setu’s resource.

Termination Complexity

Terminating a licensing agreement requires the licensee to immediately cease all use of the licensed IP — including destroying or returning licensed materials, ceasing manufacturing, and removing branded products from the market. Terminating a distribution agreement primarily requires clearing existing inventory (sell-through provisions are common), ceasing to use the trademark in marketing, and returning unsold stock (if agreed). Neither is simple, but IP cessation makes licence termination structurally more complex.

SECTION 7

7 Full Side-by-Side Comparison Table

Dimension	Licensing Agreement	Distribution Agreement
Primary purpose	Grant rights to use, manufacture, or commercialise IP	Grant rights to buy and resell products in a territory
What is transferred?	IP usage rights (not ownership)	Product resale rights + product title on purchase
IP ownership	Licensor always retains ownership	Supplier retains; distributor gets limited trademark use only
Revenue model for rights holder	Royalties (% of sales) or fixed licence fees	Wholesale product margin (price sold to distributor)
Revenue model for partner	Revenue from exploiting licensed IP, minus royalties	Margin between wholesale cost and resale price
Inventory risk	Licensee (if manufacturing) or negotiated	Distributor bears full inventory risk
Who manufactures?	Licensee (if manufacturing licence) or licensor	Supplier manufactures; distributor buys finished goods
Quality control obligations	Extensive — licensor must control to protect IP/trademark validity	Moderate — supplier sets product standards; distributor handles storage and presentation
Pricing control	Licensor controls royalty rate; licensee sets end price	Supplier sets wholesale price; distributor sets resale (RPM restrictions apply)
Reporting & audit requirements	Extensive — royalty reporting and audit rights critical	Moderate — sell-through reporting, forecasting, and market data
Exclusivity options	Exclusive, non-exclusive, or sole licence	Exclusive, non-exclusive, selective, or sole distribution
Termination complexity	High — licensee must cease all IP use immediately	Moderate — sell-through period and stock return provisions
Typical duration	3–10 years (renewable)	1–5 years (renewable with performance review)
Common sectors	Pharma, technology, FMCG, food & beverage, media, manufacturing	Consumer goods, electronics, food & beverage, industrial, pharmaceuticals
Includes embedded licence?	It IS a licence	Often yes — trademark licence for marketing embedded within

SECTION 8

8 Essential Clauses in Each Agreement

The value of any commercial agreement lies entirely in its drafting. Both licensing and distribution agreements can look similar at a superficial level — but the clauses that protect each party’s core interests are distinct, and omitting any of these essential provisions creates commercial and legal exposure.

Essential Clauses in a Licensing Agreement

Clause 01

Grant of Licence

Precisely defines what IP is licensed, what the licensee may do with it (use, manufacture, sell, sub-licence), the territory, the field of use, and whether the licence is exclusive, sole, or non-exclusive.

Clause 02

Royalty Structure & Payment

Sets the royalty rate (percentage of net sales, gross sales, or per unit), minimum royalty guarantees, payment frequency, currency, and late payment consequences.

Clause 03

Quality Control & Standards

Critical for trademark licences — the licensor must maintain control over product quality to preserve trademark validity. Specifies standards, approval processes, and right of inspection.

Clause 04

Royalty Reporting & Audit Rights

Licensee must provide periodic royalty statements; licensor has the right to audit the licensee’s books to verify accuracy of royalty payments. Audit costs typically borne by licensor unless discrepancy exceeds threshold.

Clause 05

IP Ownership & New IP

Confirms the licensor’s ownership of licensed IP. Critically, specifies who owns improvements or modifications made by the licensee — a common source of serious disputes if not addressed upfront.

Clause 06

Sub-Licensing Restrictions

Specifies whether and how the licensee may grant sub-licences. Uncontrolled sub-licensing is a significant IP dilution and quality control risk — must be explicitly permitted or prohibited.

Clause 07

Representations & Warranties

Licensor warrants that it owns the IP and has the right to grant the licence. Licensee warrants it will use the IP only as permitted. Both parties represent their authority to enter the agreement.

Clause 08

Termination & Post-Termination

Grounds for termination (breach, insolvency, change of control), notice periods, and critically — what happens after termination: licensee must cease all IP use, destroy or return licensed materials, and provide final royalty accounting.

Essential Clauses in a Distribution Agreement

Clause 01

Appointment & Territory

Precisely defines the distributor’s territory, the products covered, and whether the appointment is exclusive, sole, or non-exclusive — and what “territory” means (country, region, channel, or customer segment).

Clause 02

Minimum Purchase Commitments

Annual or periodic minimum order volumes the distributor must achieve to retain its appointment — particularly critical for exclusive agreements where the supplier forgoes other distribution channels in the territory.

Clause 03

Pricing & Payment Terms

Wholesale pricing, currency, payment terms (net 30/60/90), credit limits, and procedures for price changes. Many suppliers include a price change notification requirement of 30–90 days.

Clause 04

Trademark Licence for Marketing

Grants the distributor a limited, non-exclusive, revocable licence to use the supplier’s brand, trademarks, and marketing materials in the territory — subject to brand guidelines and approval requirements.

Clause 05

Reporting & Market Intelligence

Distributor’s obligation to provide sell-through data, inventory levels, market intelligence, and competitive information — critical for the supplier to manage the territory and plan production and marketing.

Clause 06

Non-Compete & Non-Solicitation

Restricts the distributor from selling directly competing products during the term (and sometimes for a defined period after termination). Scope must be carefully calibrated to avoid competition law issues in the relevant jurisdiction.

Clause 07

Term & Renewal

Initial term, renewal conditions (automatic or by election), performance review triggers for non-renewal, and notice requirements. Many jurisdictions have specific rules on minimum notice periods for distribution agreement termination.

Clause 08

Termination & Stock Clearance

Grounds for early termination, notice periods, sell-through period for existing inventory (typically 60–180 days post-termination), right of repurchase of unsold stock, and immediate cessation of trademark use.

SECTION 9

9 Pros & Cons of Each Model

Licensing Agreement: Advantages & Disadvantages

✅ Advantages of Licensing

✅ Enables rapid market entry without direct capital investment in manufacturing or operations
✅ Generates royalty income from IP that might otherwise be underutilised in certain markets
✅ Licensee’s local expertise, market knowledge, and relationships accelerate adoption
✅ Scalable across multiple territories simultaneously through multiple licensees
✅ Licensor retains full IP ownership throughout — it can be relicensed or recaptured
✅ Enables market presence where direct investment would be restricted or impractical

⚠️ Disadvantages of Licensing

⚠️ Quality control risk — licensee’s poor execution can damage the brand or invalidate trademarks
⚠️ Royalty verification depends entirely on the licensee’s honest reporting — audit rights are essential but rarely exercised proactively
⚠️ IP leakage risk — licensees may, intentionally or not, expose trade secrets to third parties
⚠️ Licensee may become a future competitor if they develop expertise using your IP
⚠️ Complex to terminate if licensee has integrated the IP into their operations
⚠️ Lower per-unit return than manufacturing and selling directly in the market

Distribution Agreement: Advantages & Disadvantages

✅ Advantages of Distribution

✅ Fast market entry using the distributor’s existing trade relationships and logistics infrastructure
✅ Distributor bears inventory risk and working capital — supplier receives cash on sale to distributor
✅ Supplier retains full product design, manufacturing, and quality control — just sells into the channel
✅ Distributor’s local regulatory knowledge handles import compliance, product registration, and labelling
✅ Relatively easy to switch distributors if performance is poor — no IP entanglement
✅ Minimum purchase commitments provide demand visibility for production planning

⚠️ Disadvantages of Distribution

⚠️ Supplier has limited visibility into end-customer relationship and pricing in the market
⚠️ Exclusive distribution gives a single party significant leverage — if they underperform, the supplier is locked out of the market
⚠️ Distributor may carry competing products that take priority over your brand
⚠️ Supplier cannot directly control the price at which its products reach end customers (resale price maintenance laws)
⚠️ Brand reputation can be damaged by poor distributor service, improper storage, or grey market activity
⚠️ Many jurisdictions have strong distributor protection laws that make termination costly

SECTION 10

10 Which Agreement Structure Is Right for Your Business?

The right structure depends on what you are commercialising (IP, manufactured products, or both), your level of control over quality and brand, your capital position, and the nature of the market you are entering. Use this decision framework:

🧭 Licensing vs Distribution Decision Guide

If you want to monetise a patent, formula, technology, or brand without manufacturing locally…

→ Use a Licensing Agreement

Licensing

Grant the local partner rights to manufacture or commercialise your IP under licence. You earn royalties; they manage local operations.

If you already manufacture and want to expand market reach without building a local sales force…

→ Use a Distribution Agreement

Distribution

Appoint a verified local distributor to buy and resell your products. Find verified partners via GT Setu’s international distributor network.

If you want the distributor to also promote and use your brand in local marketing…

→ Embed a Trademark Licence in the Distribution Agreement

Combined

Include a limited, non-exclusive trademark licence within the distribution agreement — standard practice in international B2B distribution.

If you need the partner to have maximum commitment and invest in market development…

→ Use Exclusive Arrangements (Either Model)

Exclusive

Exclusive licences and exclusive distribution both demand higher partner commitment — supported by minimum performance obligations in the agreement.

If protecting your IP from leakage and misuse is your primary concern…

→ Start with an NDA, then a Tightly Drafted Licence

IP-First

Use GT Setu’s built-in secure B2B collaboration workflows before any sensitive disclosure. Then structure a tightly scoped licence with quality control and audit rights.

Not sure which structure fits and need to find verified international partners?

→ Start on GT Setu

GT Setu

Discover verified manufacturers, distributors, and licensing partners across 100+ countries — anonymously and with built-in NDA infrastructure from day one.

SECTION 11

11 When Licensing and Distribution Work Together

💡 The Most Common Real-World Structure

In the vast majority of international B2B trade partnerships, licensing and distribution are not alternatives — they operate simultaneously within the same commercial relationship. A distribution agreement almost always contains an embedded licence (typically for trademark use), and a manufacturing licence often operates alongside a distribution arrangement that governs how the licensed product reaches market.

Understanding how these two structures layer on top of each other is essential for anyone building an international commercial partnership. Here are the most common combined structures you will encounter:

Distribution Agreement + Embedded Trademark Licence

The most common structure in international B2B distribution. The distribution agreement governs product purchase and resale; an embedded licence clause permits the distributor to use the supplier’s trademarks and brand assets for local marketing. The trademark licence terminates automatically when the distribution agreement ends.

📍 Standard structure for consumer goods, electronics, and FMCG international distribution

Manufacturing Licence + Distribution Rights

The licensor grants both a manufacturing licence (to produce the product locally) and distribution rights (to sell in a defined territory). Common in markets where import costs or regulatory requirements make local manufacturing advantageous — and related to OEM and contract manufacturing models.

📍 A food brand licensing its formula to a local manufacturer who also has exclusive distribution rights for that market

Technology Licence + Reseller / Distribution Agreement

Common in software and technology. A technology licence governs the right to deploy the technology; a reseller or distribution agreement governs how the technology partner sells it to end clients. The two documents work in parallel with cross-references to each other.

📍 An enterprise software company appointing regional resellers who each receive a non-exclusive technology licence plus a reseller agreement

Brand Licence + White-Label Distribution

The licensor allows the licensee to use its brand on products manufactured by the licensee (own-manufacture or via a third-party CM) and sell them under the licensed brand. Closely related to ODM manufacturing models where the brand is the primary asset being licensed.

📍 A consumer brand licensing its trademark to a regional manufacturer who produces and distributes the products locally

✨ GT Setu Insight

When building any of these combined structures internationally, the quality of the partner you choose is more consequential than the quality of the agreement you draft. A well-drafted agreement with a poorly-vetted partner creates expensive legal disputes; a relationship with a verified, credible partner rarely needs to invoke dispute provisions. GT Setu’s business verification infrastructure ensures every partner you discover on the platform has been independently verified before any commercial discussion begins.

SECTION 12

12 Industries, Use Cases & Real-World Examples

Industry	Dominant Structure	Why This Structure?	Typical Real-World Example
Pharmaceuticals	Manufacturing Licence + Distribution Agreement	Local manufacturing mandated or tax-advantaged; IP protection of formula is paramount	Originator pharma brand licences formula to regional CMO; distribution agreement governs market access
Consumer Electronics	Distribution Agreement + Trademark Licence	Supplier manufactures centrally; distributor handles local import, sales, and after-sales	European electronics brand appointing exclusive GCC distributor via GT Setu with embedded trademark licence
Food & Beverage	Manufacturing Licence (for branded production) or Distribution Agreement (for imports)	Perishability requires local production in many markets; import model used where logistics allow	An international FMCG brand licensing its recipe to a local manufacturer in India; OR using an importer-distributor in the UAE
Technology / SaaS	Technology Licence + Reseller Agreement	Software is IP — licensing is the natural structure; reseller agreement governs channel economics	Enterprise software platform licensing to regional value-added resellers (VARs) across Southeast Asia
Fashion & Apparel	Brand Licence + Distribution or Retail Agreement	Brand is the core asset; manufacturing often already outsourced to contract manufacturers	International fashion brand licensing its trademark to a regional operator for a defined territory’s retail and wholesale
Industrial Equipment	Exclusive Distribution + Trademark Licence + Service Agreement	After-sales service critical; exclusive distributor commits to holding parts stock and service capability	German industrial manufacturer appointing exclusive distributors per country with service obligations in each territory
Cosmetics & Personal Care	Manufacturing Licence (for local production) or Distribution Agreement (for imports)	Formula protection critical; local manufacturing reduces import costs in large markets	International cosmetics brand licensing formula to a local GMP-certified CMO for the ASEAN market
Media & Entertainment	Copyright Licence (territory-specific)	IP (content) is the entire product; territorial licensing governs where content can be distributed and how	Film studio licensing territorial broadcast rights to streaming platforms on a country-by-country basis

SECTION 13

13 Key Risks & How to Mitigate Them

🔍

Unverified Partner Credentials

The most common early-stage failure: engaging with a licensee or distributor who misrepresents their financial standing, market reach, or compliance credentials. GT Setu’s multi-layer business verification addresses this before any commercial discussion begins.

🔐

IP Disclosure Before NDA

Sharing proprietary formulas, product specifications, pricing structures, or trade secrets before a formal NDA is executed. GT Setu’s secure collaboration workflows enable NDA execution before any sensitive exchange takes place.

💸

Royalty Underreporting

Licensees reporting lower sales figures to reduce royalty obligations. Mitigate with robust audit rights, minimum guaranteed royalties, and periodic royalty statements — with clear consequences for material underreporting.

📉

Distributor Underperformance in Exclusive Arrangements

An exclusive distributor fails to hit targets, but the supplier is locked out of the territory. Mitigate with minimum purchase commitments, right-to-cure provisions, and performance review triggers for exclusivity conversion to non-exclusive.

⚖️

Distributor Termination Protection Laws

Many jurisdictions (particularly in the EU, Middle East, and Latin America) provide strong statutory protections for distributors on termination — including mandatory compensation regardless of contract terms. Always take local legal advice before signing in any new jurisdiction.

🏷️

Trademark Invalidity Through Uncontrolled Licensing

In many jurisdictions, a trademark can be invalidated if the owner grants a licence without maintaining quality control over the licensed products (a “naked licence”). Every trademark licence must include quality control standards and the licensor’s right of inspection.

🌐

Grey Market and Parallel Imports

Products sold legitimately in one market appearing in another at lower prices — undermining the exclusive distributor and the supplier’s pricing strategy. Addressed through careful territorial definition, anti-diversion clauses, and product traceability measures.

🚪

Difficult Exit Without Clear Termination Provisions

Attempting to exit a licensing or distribution relationship without clear contractual termination rights creates significant legal and commercial exposure. Exit provisions — notice periods, stock return, IP cessation, and non-compete obligations — must be drafted before the relationship begins, not after problems arise.

SECTION 14

14 How GT Setu Helps You Find Verified Licensing & Distribution Partners

🌐 Platform Spotlight — GT Setu

The Verified Starting Point for Every Licensing & Distribution Partnership

No licensing agreement protects against an untrustworthy licensee. No distribution contract compensates for a distributor who misrepresented their market reach. The most frequently cited cause of international licensing and distribution failure is not poor contract drafting — it is choosing the wrong partner. GT Setu was built to solve this foundational problem: a compliance-verified, anonymised B2B discovery environment where brand owners, IP holders, manufacturers, and international distributors find and connect with verified partners — across 100+ countries, with built-in NDA infrastructure from first contact and zero broker commission on any deal. Whether you are a brand owner seeking a licensing partner to manufacture your product formula in Southeast Asia, a manufacturer seeking an exclusive regional distributor for the GCC, or a distributor seeking new principals to represent — GT Setu provides the verified foundation every commercial relationship needs before any agreement is drafted.

✅

Multi-Layer Verification Business registration, tax status, regulatory certifications, and compliance records checked before any company is listed on the platform.

🕵️

Anonymous Discovery Explore verified licensing and distribution partner profiles without revealing your identity until mutual interest is confirmed.

📄

Built-In NDA Workflow Formalise confidentiality before sharing any formula, product specification, pricing structure, or proprietary information — with a full digital audit trail.

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Zero Commission No broker fees on any deal — whether a licensing arrangement, exclusive distribution agreement, or co-manufacturing partnership.

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Encrypted Collaboration All documents and communications encrypted in transit and at rest. Secure B2B collaboration from first contact.

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100+ Countries Active verified network for international distributors, licensing partners, and manufacturing collaborators across Asia, the Middle East, Europe, Africa, and the Americas.

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GT Setu vs Traditional Partner Discovery

Feature GT Setu Traditional Channels

Pre-verified distributor / licensee credentials

✓ Always

✗ Rarely

Anonymous discovery before commitment

✓ Yes

✗ No

NDA before sensitive disclosure

✓ Built-in workflow

~ External legal needed

Zero broker commissions

✓ Always

✗ Often 5–15%

Licensees + Distributors on one platform

✓ Single platform

✗ Separate sources

Encrypted document sharing

✓ Built-in

✗ Email risk

100+ country coverage

✓ Yes

~ Geography-limited

FAQ

? Frequently Asked Questions

QWhat is the difference between a licensing agreement and a distribution agreement?

A licensing agreement grants a licensee the right to use the licensor’s intellectual property — such as a trademark, patent, technology, or formula — typically in exchange for royalties, while the licensor retains IP ownership. A distribution agreement grants a distributor the right to purchase and resell the supplier’s products within a defined territory — the distributor buys at wholesale and earns a margin on resale. The key distinction: licensing deals with IP rights and often authorises the licensee to manufacture or use the IP; distribution deals with physical or digital products that the distributor buys from the supplier and resells. In many international arrangements, both structures work together — a distribution agreement typically includes an embedded trademark licence permitting the distributor to use the supplier’s brand in local marketing.

QWhat is an exclusive distribution agreement?

An exclusive distribution agreement grants a single distributor the sole right to sell a supplier’s products within a defined territory. During the term of the agreement, neither the supplier nor any other distributor may sell those products to customers in that territory. Exclusive appointments typically require higher minimum purchase commitments from the distributor in return for territorial protection. They are the dominant structure in international market entry where the supplier wants a committed, investing partner rather than a passive reseller.

QCan a distribution agreement include a licence?

Yes — and in practice, this is the norm rather than the exception. A distribution agreement almost always includes a limited trademark licence permitting the distributor to use the supplier’s brand name, logo, and marketing materials in the assigned territory. This trademark licence is typically restricted to use in connection with the authorised products, non-exclusive, non-transferable, and automatically terminates when the distribution agreement ends. In some cases, particularly where the distributor is also manufacturing (such as in a licensed manufacturing plus distribution arrangement), additional IP licence provisions will be included.

QWhat are the essential clauses in a distribution agreement?

The essential clauses in a distribution agreement include: (1) Grant of distribution rights — scope, territory, and exclusivity level; (2) Minimum purchase commitments or minimum sales targets with consequences for shortfall; (3) Pricing, payment terms, and credit conditions; (4) Trademark licence for marketing use in the territory; (5) Product quality, storage, and compliance obligations; (6) Reporting requirements — sell-through data, forecasting, and market intelligence; (7) Term and renewal conditions; (8) Termination rights, notice periods, and sell-through provisions for existing inventory; (9) Non-compete obligations during and after the term; and (10) Governing law and dispute resolution mechanism — particularly important in cross-border arrangements.

QWhat is a naked licence and why is it dangerous?

A naked licence occurs when a trademark owner grants a licence to use their trademark without maintaining adequate quality control over the licensee’s use of that mark. In many jurisdictions — including the United States and several European countries — a naked licence can result in the trademark being invalidated, as the owner is deemed to have abandoned control over the mark’s use. This is a critical risk for any business that grants trademark licences without including and enforcing quality control provisions. Every trademark licence must specify the quality standards the licensee must meet, the licensor’s right of inspection and approval, and remedies for breach of those standards.

QWhat is the difference between an exclusive licence and an exclusive distribution agreement?

Both are exclusive in their respective domains. An exclusive licence grants the licensee the sole right to use specified IP in a defined scope — even the licensor is excluded from exercising those rights in that scope. An exclusive distribution agreement grants one distributor the sole right to sell the supplier’s products in a defined territory — no other distributor may sell there, and (in a truly exclusive structure) neither may the supplier. The commercial consequence is similar — one party has sole access to a market or IP for a period — but the legal instrument, the rights transferred, and the obligations attached are fundamentally different. Exclusive licences are governed by IP law; exclusive distribution agreements are governed by contract law (and in some jurisdictions, commercial agency and distributor protection laws).

QHow do I find verified international distributors or licensing partners?

The most efficient and secure approach is through a compliance-verified B2B discovery platform like GT Setu. GT Setu provides pre-verified distributor and licensing partner profiles across 100+ countries — covering manufacturers, brand owners, distributors, and IP licensees — with built-in NDA workflows that protect your IP from the very first interaction. Unlike cold databases or trade shows, every company on GT Setu has been independently verified before listing. And because the platform operates on a zero-commission model, your deal economics stay entirely between you and your verified partner. See GT Setu’s dedicated resource on finding international distributors for detailed guidance.

Ready to Find Verified Licensing & Distribution Partners Globally?

Join 500+ verified manufacturers, brand owners, and distributors already building cross-border licensing and distribution partnerships on GT Setu — with compliance-backed verification, built-in NDA workflows, and zero broker fees across 100+ countries.

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