Legal risks of license agreements under Vietnamese law

Legal risks in license agreements are issues that many enterprises may encounter when transferring the right to use intellectual property objects. If not carefully drafted and thoroughly reviewed, a license agreement may lead to disputes, violations of legal regulations, or financial losses and infringement of the parties’ lawful rights and interests. Therefore, identifying and preventing legal risks in license agreements from the contract negotiation and execution stage is an important factor in helping enterprises protect their legitimate rights and interests.

I. Current situation relating to legal risks in license agreements

In practice, within business activities and intellectual property licensing transactions, legal risks in license agreements occur quite frequently. Many enterprises execute agreements without fully verifying the legal status of the industrial property object or without clearly stipulating the scope, duration, and exploitation rights.

In addition, some license agreements are drafted inconsistently with the provisions of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), thereby creating risks of contract invalidity or disputes between the parties. Furthermore, the absence of effective mechanisms for controlling the use of licensed objects may result in economic losses and adversely affect the lawful rights and interests of intellectual property right holders.

II. The concept of legal risks in license agreements

1. What are legal risks in a license agreement?

A license agreement (an agreement on the transfer of the right to use industrial property objects) is an agreement between the owner of industrial property rights and another organization or individual regarding the permission to use industrial property objects within a specific scope, duration, and under certain conditions.

Pursuant to Article 141 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), an agreement on the use of industrial property objects is an agreement allowing the licensee to exploit and use industrial property objects such as trademarks, inventions, and industrial designs without transferring ownership of such objects.

Legal risks in license agreements are risks leading to disputes or legal consequences due to the agreement’s failure to satisfy legal conditions, unclear provisions regarding the scope of use, rights and obligations of the parties, or violations of intellectual property regulations. These risks may result in the agreement being declared invalid, terminated prior to expiry, or leading to liability for damages between the parties.

2. What are the common causes leading to legal risks in license agreements?

In practice, legal risks in license agreements commonly arise from non-compliance with the provisions of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025). Common causes include:

• Incorrect transferor: Pursuant to Clause 1 Article 141, only the owner or a person authorized by the owner has the right to grant a license.
• Improper contractual form: Clause 2 Article 141 requires that a license agreement must be made in writing.
• Failure to clearly determine the type of agreement: Pursuant to Article 143, the agreement may be exclusive, non-exclusive, or sub-licensing.
• Incomplete or unclear contractual contents: Pursuant to Clause 1 Article 144, the agreement must contain essential terms such as scope, territory, duration, licensing fee, and rights and obligations of the parties.
• Presence of legally prohibited clauses: Clause 2 Article 144 provides that clauses unreasonably restricting the rights of the licensee shall automatically be deemed invalid.

Accordingly, legal risks in license agreements mainly arise from violations relating to the contracting parties, contractual form, and contractual contents under the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025).

3. What legal risks commonly arise in license agreements?

In practice, license agreements may lead to various legal risks if the parties fail to comply with the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025) and the Civil Code 2015. Common risks include:

• Invalid agreements: If the agreement fails to satisfy the validity conditions under Article 117 of the Civil Code 2015 or violates regulations on the transfer of the right to use industrial property objects under Article 141 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), the agreement may be declared invalid.
• Disputes over the scope of rights usage: Where the agreement does not clearly stipulate the scope, territory, duration, or type of agreement (exclusive or non-exclusive) in accordance with Articles 143 and 144 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), disputes are likely to arise during exploitation of the rights.
• Risks relating to the validity of protection titles: If the protection title for the industrial property object is terminated or invalidated, the right to use under the license agreement may also be affected.
• Risks arising from invalid contractual clauses: Pursuant to Clauses 2 and 3 Article 144 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), clauses unreasonably restricting the rights of the licensee shall automatically be deemed invalid, thereby affecting the enforceability of the agreement.
• Disputes arising during contract performance: For example, breaches relating to payment of licensing fees, use of rights beyond the permitted scope, or violations of obligations agreed upon between the parties.

III. Legal regulations relating to legal risks in license agreements

1. Conditions for validity of a license agreement

A license agreement (agreement on the transfer of the right to use industrial property objects) shall only be valid when satisfying the conditions prescribed by civil law and intellectual property law. Specifically:

• General conditions applicable to civil transactions: Pursuant to Article 117 of the Civil Code 2015, a civil transaction is valid when all of the following conditions are satisfied:
  + The parties possess legal capacity and civil act capacity appropriate to the transaction;
  + The parties participate voluntarily;
  + The purpose and contents do not violate legal prohibitions or social ethics;
  + The form of the transaction complies with legal requirements.
• Conditions relating to transfer rights over industrial property objects: Pursuant to Article 141 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), the transfer of the right to use industrial property objects may only be conducted by the owner or a person authorized by the owner through a written agreement.

2. Form of a license agreement

Pursuant to Clause 2 Article 141 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), the transfer of the right to use industrial property objects (license agreements) must be made in writing.

Such a requirement aims to ensure transparency, clearly define the rights and obligations of the parties, and provide a legal basis for dispute resolution should disputes arise during contract performance. If a license agreement is not made in writing, it may not be legally recognized.

3. What does the law provide regarding the mandatory contents of a license agreement?

Pursuant to Clause 1 Article 144 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), a license agreement must contain the following principal contents:

• Full names and addresses of the licensor and licensee;
• Grounds for the transfer of usage rights;
• Type of agreement (exclusive, non-exclusive, or sub-license agreement);
• Scope of the transferred usage rights, including limitations on usage rights and territory;
• Duration of the agreement;
• Licensing fee;
• Rights and obligations of the parties under the agreement.

In addition, pursuant to Clause 2 Article 144 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), the agreement must not contain clauses that unreasonably restrict the rights of the licensee; otherwise, such clauses shall automatically be deemed invalid under the law.

4. How does the law regulate early termination of license agreements?

Current law does not provide a separate and specific provision governing early termination of license agreements. However, such an issue is determined on the basis of civil law and intellectual property law.

• Pursuant to Article 422 of the Civil Code 2015, a contract shall terminate in circumstances such as: Completion of the contract; termination by agreement of the parties; death of an individual party or dissolution of a legal entity; cancellation of the contract; or unilateral termination in accordance with law.
• Pursuant to Article 144 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), the parties to a license agreement must clearly agree on the contractual term as well as the rights and obligations of the parties. Therefore, early termination may occur where contractual obligations are breached or where contractual conditions agreed upon by the parties are triggered.
• Furthermore, where the industrial property object is terminated or its protection title is invalidated under the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), the licensed usage rights under the agreement may no longer have a legal basis for continued performance.

IV. Questions relating to legal risks in license agreements

1. How can legal risks be identified and assessed before entering into a license agreement?

Before executing a license agreement, the parties should verify the legal status of the industrial property object (protection title, scope of protection, and protection term), the authority of the licensor, and the scope of transferred rights. In addition, the parties should carefully review provisions concerning the scope of use, duration, territory, and the rights and obligations of the parties to ensure compliance with Articles 141 and 144 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), particularly provisions regarding the transfer of the right to use industrial property objects.

2. Can a license agreement be amended or supplemented after execution to remedy legal risks?

The parties may fully agree to amend or supplement the contents of a license agreement after execution, provided that such amendments do not violate legal regulations. Pursuant to Article 421 of the Civil Code 2015, an agreement may be amended or terminated by mutual agreement of the parties. Where the amendments relate to a registered agreement on the transfer of the right to use industrial property objects, the parties must implement amendment registration procedures with the competent authority in accordance with the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025).

3. In cases involving foreign elements, what legal risks should be noted?

For license agreements involving foreign elements, the parties should pay attention to issues such as the governing law, dispute resolution authority, territorial scope of the transferred right to use, and agreement registration requirements. Pursuant to Article 683 of the Civil Code 2015, the parties are entitled to agree upon the applicable law for contracts involving foreign elements.

At the same time, the transfer of the right to use industrial property objects must comply with Articles 141 and 144 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025) in order to avoid risks relating to validity and protection scope.

4. What is the role of legal consultancy in preventing and handling legal risks in license agreements?

Legal consultancy plays an important role in preventing and handling legal risks relating to license agreements. Lawyers or legal experts may assist in verifying the legal status of industrial property objects, reviewing and drafting contractual provisions, and clearly defining the scope of transferred rights as well as the rights and obligations of the parties in order to avoid potential disputes.

Pursuant to Article 141 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), agreements on the use of industrial property objects must be made in writing and comply with legal regulations. Furthermore, Article 144 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025) prescribes the principal contents of a license agreement; therefore, obtaining legal consultancy helps enterprises establish agreements in compliance with legal regulations and minimize risks of invalidity or disputes during performance.

5. Should enterprises conduct periodic legal reviews of effective license agreements?

Enterprises should conduct periodic legal reviews of effective license agreements to ensure that contractual performance complies with legal regulations and minimizes risks arising during the exploitation of intellectual property rights.

Pursuant to Article 145 of the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025), a license agreement must clearly specify the scope of transferred rights, duration, territory, transfer price, and the rights and obligations of the parties. During performance, if there are changes in the legal status of the protection title, exploitation needs, or legal regulations, enterprises should review the agreement in order to promptly amend or supplement it in accordance with the parties’ agreement and the Civil Code 2015.

Periodic legal reviews not only help identify risks relating to the validity of the agreement, scope of use rights, or payment obligations at an early stage, but also enable enterprises to proactively amend the agreement to ensure their lawful rights and interests during the exploitation of industrial property objects.

V. Why should you seek legal advice from NPLaw regarding legal risks in license agreements?

When legal risks arise in a license agreement, seeking assistance from experienced lawyers will help enterprises accurately assess such risks and adopt solutions in compliance with legal regulations. NPLaw is a reputable legal consultancy firm in the fields of intellectual property and commercial contracts.

• Team of lawyers with in-depth expertise in intellectual property law: Lawyers at NPLaw possess extensive experience in advising on and handling issues relating to license agreements under the Law on Intellectual Property 2005 (as amended and supplemented in 2009, 2019, 2022, and 2025) and relevant provisions of the Civil Code 2015.
• Assistance in reviewing and assessing legal risks in agreements: Lawyers assist enterprises in verifying the legality of contracting parties, contractual contents, scope of transferred rights, and validity of agreements in order to promptly identify legal risks.
• Consultancy on drafting, amending, and negotiating license agreements: NPLaw supports enterprises in establishing well-structured contractual provisions compliant with legal regulations, thereby minimizing disputes and protecting business interests.
• Assistance in dispute resolution: In the event of disputes arising from license agreements, lawyers may advise on negotiation or mediation strategies or represent clients in protecting their rights and interests before competent authorities.

The above information is provided for reference purposes only. Should clients require detailed advice regarding specific cases, please contact NPLaw Firm for immediate consultation.