Licensees may also be licensors either, as described earlier, sub-licensing to others or through cross-licensing their own IP in exchange for that of the Licensor's.

From a licensor's point of view it is important to select licensees who are going to be in the best position to exploit the licensor's IP.

Distributors and Foreign Direct Investment
When expansion into overseas markets is being considered using a distributor or foreign manufacturing subsidiary rather than licensing should also be considered.

Dunning¹ has described how foreign direct investment is decided by the 3 conditions of :

• Ownership: where the company owns key strategic assets such as relevant IP
• Internalisation: where the company prefers in-house production to avoid trade secret loss
• Localisation: where it is preferable to locate the business in the foreign country.

Where ownership,internalisation and localisation conditions apply then investment in a subsidiary foreign manufacturing operation may be necessary.

Where ownership and internalisation apply then using a distributor may be preferable. In such a case the IP owner will manufacture goods and use the foreign distributor to market them under a distribution agreement rather than licensing manufacture².Other factors which may lead to a distributorship being preferable include :

• tax considerations, both local and foreign,
• overseas laws making money paid for goods easier to repatriate than licensing royalties

Where only ownership is established and internalisation and localisation of production are unnecessary then licensing a foreign manufacturer is possible.