LICENSING AGREEMENT HELD VOID

When it comes to monetizing intellectual property, one of the most common methods often sought after is the licensing or franchising business model. These are two very distinct species.

Licensing is a simpler process; franchising, on the other hand, is complex and heavily regulated under the Malaysian Franchise Act.

Therefore, when choosing between a licensing or franchising business model, it is important to ensure that they do not overlap.

In a recent reported case, the Court found that the licensing agreement contains language that defines the agreement as “franchise,” and because there was no registration of the franchisor as required under the Franchise Act, the agreement was held void.

There were arguments put forward, one of which was that the label affixed to the agreement clearly states, “Licensing Agreement,” which should render the agreement not a franchise.

The argument was rejected by the courts. It was held that in the construction of agreements, the court is not bound by the labels parties choose to affix onto the agreement. It is the duty of the court to construe the agreement as a whole and determine from its language its true nature and purport. In this case, the terms of the agreement were clearly within the definition of a franchise, hence, void.

To learn more about licensing or franchising in Malaysia kindly write to legal@timothyjdass.com

[please see case reference: [2024] MLJU 99]

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