Licensed production

[8] European automobile manufacturers were the first to adopt this practice, producing a number of specialized American components for their passenger cars under license.

[5] The United States not only supplied European factories with the necessary blueprints and licenses, but also sourced American-made tooling equipment accordingly, which allowed the automobile companies to optimize their production lines.

[3] The United States began inserting pro forma statements into licensing agreements known as "side letters", which required the free sharing of any improvements made to American technology.

[3] For instance, France stipulated that military vehicles manufactured in South Africa under a French license were not to be exported to other foreign nations without its express approval.

[3] The governments of Germany and Switzerland imposed similar restrictions on military vehicles manufactured in Argentina and Chile under license.

[3] Governments of developing nations often sought to encourage rapid industrialization, reduce dependence on foreign imports, and combat high levels of unemployment by creating and retaining local jobs.

[2] Since their research capacity was typically too limited to meet their goals, adopting licensing agreements for foreign technology was an especially attractive option.

[3] Products in high demand on the international market can be reproduced, based on the same or similar design, and branded in ways to make them indistinguishable from the original.

[3] The manufacturers responsible may also grant legitimately registered sub-licenses for their unlicensed products, profiting at the expense of the real intellectual property owner.

[3] The quality of unlicensed goods varies greatly; the United Nations Office on Drugs and Crime has noted that while licensing companies often provide quality control measures, and there is some incentive for licensees to comply or risk legal action and the ensuing damage to their own profit, manufacturers who engage in unlicensed production are under no such obligations.

[14] Another method of circumventing the need for a license involves a manufacturer making slight modifications in the design or function of an existing product, before reproducing it.

An example of global licensing agreements: national governments which have purchased foreign licenses to manufacture arms and ammunition are depicted in blue. [ 3 ] [ 4 ]
1933 Fiat 508 manufactured under license in Poland by Polski Fiat .