Reading the risk in IP and licensing for a technology

A technology group moving into Asia does not face one legal question. It faces several simultaneously: where the intellectual property should sit, which law governs each licence, how revenue flows are characterised by different tax and regulatory authorities, and what happens when a counterparty disputes the arrangement in a jurisdiction whose courts the group has never engaged. The answers rarely align by default.

For a technology group expanding into Asia through Hong Kong, the core risk in IP and licensing sits at the intersection of the applicable licence law, the territorial scope of local IP protection, and the Anti-Money Laundering and Counter-Terrorist Financing Ordinance's requirements where licensed activity touches virtual assets or regulated payment flows – a combination that has sharpened materially since the virtual-asset trading platform licensing regime commenced on 1 June 2023.

This analysis works through the commercial stakes, the governing instruments, the comparative read across Hong Kong and the primary jurisdictions a technology group will engage, and where the risk actually concentrates. It is addressed to general counsel, CFOs and their advisers who have a real expansion decision in front of them.

What is commercially at stake: the IP and licensing decision as a balance-sheet event

IP is not a legal formality. For most technology groups, it is the balance sheet. Where the IP sits – which entity owns it, and which entity licenses it to operating subsidiaries – determines how revenue is attributed, which jurisdiction can tax it, and which courts can reach it in a dispute.

A technology group entering Asia typically confronts a choice early on: keep the IP in the existing holding entity (often a US, UK or European company) and license down into Asia, or migrate or develop new IP in an intermediate Asian holding entity. Each path has materially different consequences for tax, regulatory exposure, and enforcement.

The licensing posture matters immediately. A licence from a US parent to a Hong Kong operating company raises questions about royalty rates, withholding tax treatment, and whether the arrangement will be respected by the Inland Revenue Department as reflecting the genuine economic substance of the relationship. A licence from a BVI intermediate to the same Hong Kong operating company raises a further set of questions about substance requirements at the BVI level, and whether the arrangement engages the foreign-sourced income exemption rules now in effect under Hong Kong's territorial tax system.

What foreign counsel often miss is that the legal question and the commercial question are the same question. The licence structure is not just a tax-planning tool; it is the document that governs what the counterparty owes, which party bears the risk of infringement by a third party, and what remedies are available if the operating relationship breaks down. Getting the governing law right is not optional.

How does the Hong Kong legal system engage with IP and cross-border licensing?

Hong Kong operates a common-law system and recognises intellectual property rights through a combination of domestic registration statutes and international conventions to which the territory adheres by virtue of its status within the People's Republic of China. Trade marks, patents and designs require registration in Hong Kong separately from registrations in the Mainland or elsewhere; a Mainland registration does not extend protection to Hong Kong.

This is the first practical trap for an expanding technology group. A group that has diligently registered its trade marks and patents in the Mainland, the United States and the European Union may arrive in Hong Kong – or enter into a licensing agreement with a Hong Kong entity – without valid Hong Kong IP protection. The licence will be legally operative, but the licensor's ability to take infringement action in Hong Kong courts will depend on rights that may not yet exist.

The governing instrument for the courts is well-established: Hong Kong's Court of First Instance handles IP disputes under the common law, applying the law chosen by the parties in the licence agreement, subject to overriding mandatory rules. The courts are experienced in cross-border IP matters and have significant jurisdiction over parties and assets.

For technology groups whose licences touch on software, data, or platform access, there is a second layer. Where the licensed technology involves or interfaces with virtual-asset functionality, the Anti-Money Laundering and Counter-Terrorist Financing Ordinance is the primary regulatory instrument. The Securities and Futures Commission is the licensing authority for centralised virtual-asset trading platforms under that Ordinance. The question of whether a licence for a technology product brings the licensee, or the licensor itself, within the scope of that regime is a live and consequential question – not a theoretical one.

The cross-border interface: Hong Kong versus the Mainland

The most significant cross-border interface for most technology groups entering Asia is between Hong Kong and the Mainland. The two systems share a country but operate distinct legal regimes.

IP protection on the Mainland is governed by PRC law and requires separate registration with Mainland authorities. A Hong Kong-registered trade mark provides no protection in Shenzhen, Shanghai or Beijing. A technology group that structures its Asian expansion with a Hong Kong licensing entity must register its IP independently in each jurisdiction in which it expects to enforce it – or it is licensing rights it cannot defend.

On the enforcement side, the regime for recognising and enforcing judgments between Hong Kong and the Mainland changed significantly when the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) came into force on 29 January 2024. That Ordinance removed the old exclusive-jurisdiction requirement and replaced it with a connection-based test. The practical effect is that a Hong Kong judgment in a licensing dispute against a Mainland counterparty now has a more accessible enforcement route in the Mainland than it did before. But the route is not automatic: registration with the Court of First Instance remains a precondition for enforcement, and the categories of excluded matter – including certain IP-related proceedings – should be reviewed on the specific facts.

For arbitration-based dispute resolution in technology licences, the Arbitration Ordinance (Cap. 609) is the governing statute in Hong Kong, modelled on the UNCITRAL Model Law. HKIAC-administered arbitration under the 2024 HKIAC Administered Arbitration Rules (effective 1 June 2024) offers a well-regarded neutral forum for technology licensing disputes. The interim-measures Arrangement between Hong Kong and the Mainland, in effect since 1 October 2019, means that a party to a Hong Kong-seated arbitration can seek interim measures from Mainland courts – a practically important capability where the counterparty's assets are in the Mainland.

In our cross-border practice, we see technology groups regularly underestimate the enforcement gap. The licence agreement is drafted with care; the dispute-resolution clause names a credible forum; but no one has mapped the enforcement route against the counterparty's actual asset profile. When a Mainland operating company is the licensee and the assets are in the Mainland, the enforcement route determines the value of the award.

The comparative read: Hong Kong, Singapore and the BVI

Technology groups structuring Asian IP arrangements will often consider Singapore alongside Hong Kong as a potential licensing hub. The comparison matters because the choice of hub determines the law applicable to the licence, the tax treatment of royalties, and the enforcement forum.

Both Hong Kong and Singapore operate common-law systems, have well-developed IP regimes, and are party to the relevant international conventions. Both are credible enforcement jurisdictions. The structural differences that matter for a technology group are primarily in tax and regulatory posture, not in the quality of the courts.

Hong Kong's profits tax operates on a strict territorial basis: only Hong Kong-sourced profits are taxable. The two-tier rates of 8.25% on the first HK$2 million of assessable profits and 16.5% above apply to corporations. Royalties received by a Hong Kong IP-holding entity from a foreign licensee may fall outside the charge entirely if the income is not Hong Kong-sourced – but this analysis depends on where the IP was developed, where the entity has substance, and how the foreign-sourced income exemption regime (in force from 1 January 2023, as amended) interacts with the specific fact pattern. There is no withholding tax on dividends or interest in Hong Kong in the general position, and there is no capital gains tax.

The BVI is frequently used as the entity above the Hong Kong holding company, not as the primary licensing entity. A BVI intermediate holding IP creates its own set of considerations: the economic-substance requirements that apply to BVI entities in the relevant sector, the question of whether royalties flowing from the Hong Kong operating company to the BVI vehicle are commercially priced, and the potential application of the FSIE rules to the Hong Kong company's receipts from the BVI entity.

For technology groups whose products are within scope of the Pillar Two framework, the picture changes further. Hong Kong's minimum top-up tax and income inclusion rule apply to in-scope multinational groups for fiscal years beginning on or after 1 January 2025, targeting groups with consolidated revenue of EUR 750 million or above. For those groups, the IP-holding location and the royalty flows between entities will affect the effective tax rate calculation in a material way. Counsel on our desk regularly engage with in-scope groups that have not yet mapped the Pillar Two implications of their proposed Asian IP structure.

Where the regulatory risk actually concentrates

For most technology groups, the primary regulatory risk in an Asian IP and licensing structure does not arise from the licence agreement itself. It arises from what the licensed technology does, and what regulatory classification that attracts.

The critical threshold question in Hong Kong is whether the technology group's product – or the platform it licenses to a Hong Kong counterparty – engages the virtual-asset regulatory perimeter. The mandatory licensing regime for centralised virtual-asset trading platforms under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, with the Securities and Futures Commission as licensing authority, applies from 1 June 2023. Where a virtual asset constitutes a "security" or "futures contract" within the meaning of the Securities and Futures Ordinance, an additional licensing layer under that Ordinance applies.

The risk for a technology licensor is not only that its licensee is subject to these requirements. It is that the licensor, depending on how the licence is structured, may also be operating within a regulated perimeter in Hong Kong. A technology group that licenses a white-label trading or settlement platform to a Hong Kong entity without mapping the regulatory classification of that arrangement is taking on exposure it may not have priced.

The AML obligations are equally concrete. VATPs in Hong Kong are subject to customer due diligence requirements and the FATF travel rule (the Financial Action Task Force rule requiring originator and beneficiary information to accompany virtual-asset transfers). A licence agreement that does not allocate these compliance obligations between licensor and licensee – specifying which entity is responsible for collecting, verifying and transmitting the required information – creates a gap that a regulator will notice before the parties do.

There is a second regulatory concentration point that technology groups often discover late: the stablecoin perimeter. The Hong Kong Monetary Authority's licensing regime for fiat-referenced stablecoin issuers commenced in 2025; parties should verify the current commencement date and perimeter before acting, as the scope of the regime may affect technology groups whose products interact with fiat-referenced instruments, whether as issuers, infrastructure providers, or licensors of the underlying technology.

What foreign counsel get wrong: three structural errors

Across the technology licensing matters that reach our desk, three errors appear with enough consistency to be worth naming directly.

The first is treating Hong Kong IP registration as a consequence of the deal rather than a precondition for it. A licence from a Hong Kong entity of rights that are not registered in Hong Kong creates a commercially exposed position. The licence is not void, but the licensor's ability to take infringement action in the Hong Kong courts – against the licensee or against third parties – depends on rights the licensor may not hold. Registration should precede execution, not follow it.

The second error is selecting Hong Kong-seated arbitration as the dispute-resolution mechanism without mapping the enforcement route against the counterparty's asset profile. HKIAC arbitration is an excellent choice for a cross-border technology licensing dispute. But an award against a BVI holding company that holds no assets other than shares in a Mainland operating company is not straightforwardly enforced. The interim-measures Arrangement provides a tool; the Mainland Judgments Ordinance provides a mechanism; but neither is self-executing, and the sequence of steps matters. Technology groups that assume the award is the end of the road are mistaken.

The third error is the mis-allocation of regulatory compliance obligations in the licence agreement. For technology products that sit within or adjacent to the virtual-asset perimeter, the licence should specify which entity holds the relevant licences, which entity is responsible for AML and travel-rule compliance, and what happens if the regulatory classification of the product changes during the term of the agreement. We see licences drafted against US or European regulatory assumptions that do not address the Hong Kong and Greater China compliance position at all. The result is a document that functions as a commercial contract but fails as a regulatory compliance instrument in the jurisdiction where the product is actually deployed.

A micro-scenario: the data-and-payments stack

A European SaaS group with a substantial fintech product line decided to enter the Greater China market in 2026. The group's primary revenue model was a licence of its platform to financial institutions and payment operators. It established a Hong Kong intermediate entity to hold the Asian IP and grant sublicences to Mainland operating partners.

The IP registration work had been done in the United States and the European Union. No Hong Kong trade mark or patent filings were made before the first sublicence was executed. The sublicence agreement was governed by English law and provided for HKIAC arbitration.

When a Mainland sublicensee began operating a variant of the platform that exceeded the scope of the sublicence, the group sought to terminate and claim damages. The arbitration was commenced in Hong Kong. The award was obtained. The enforcement analysis then identified that the Mainland sublicensee held its valuable assets in an operating subsidiary, not in the entity that was party to the sublicence.

The group's position was recoverable – the interim-measures framework and the Cap. 645 registration mechanism provided viable routes – but the sequence of steps required, and the time involved, would have been materially shortened had the enforcement analysis been done before the sublicence was executed. The group's Hong Kong IP registration was completed in parallel with the arbitration proceedings, too late to support any infringement action in the Hong Kong courts during the dispute.

A second micro-scenario: the virtual-asset infrastructure licence

An Asian technology group with a proprietary matching engine licensed the technology to a Hong Kong counterparty intending to launch a retail virtual-asset trading service in the second half of 2023. The licence was structured as a standard SaaS arrangement, with a monthly fee and a revenue-share component.

The licensor had not sought advice on the regulatory classification of the arrangement in Hong Kong. The counterparty's use of the matching engine formed the operational core of a centralised virtual-asset trading platform – which, after 1 June 2023, required a licence from the Securities and Futures Commission under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance.

The counterparty applied for the VATP licence. The application process surfaced the question of whether the licensor, which controlled the technical operation of the matching engine and received a proportion of trading revenue, was itself operating within the regulated perimeter or was a material third-party service provider subject to the platform's regulatory obligations. The AML and travel-rule allocation in the licence was silent.

We were engaged to restructure the licence, re-allocate the compliance obligations, and prepare the documentation required by the SFC's third-party service-provider assessment process. The matter was resolved, but the renegotiation of the commercial terms that had been agreed in the original licence was a significant additional cost. A regulatory-aware licensing structure at the outset would have avoided it.

Our read: where the risk is heading

The regulatory perimeter in Hong Kong is not static. The VATP regime is established but still developing; the stablecoin licensing regime commenced in 2025 and its precise scope is being worked through in practice. Technology groups that structure their Asian licensing arrangements now should build in contractual mechanisms for regulatory change – provisions that address what happens if the licensed product, or the counterparty's use of it, crosses a regulatory threshold during the term.

On enforcement, the position has improved materially since the Cap. 645 regime took effect. The removal of the exclusive-jurisdiction requirement is a genuine advance for technology licensors with Mainland counterparties, and the combination of HKIAC arbitration, the interim-measures Arrangement, and the Cap. 645 registration mechanism provides a credible enforcement architecture. The architecture needs to be designed; it does not assemble itself from the licence agreement alone.

For technology groups within scope of Pillar Two, the IP-holding and royalty-flow decisions made now will have balance-sheet consequences from fiscal years beginning on or after 1 January 2025. Groups at or approaching the EUR 750 million consolidated revenue threshold should be modelling the effective-rate implications of their proposed structure before the structure is set, not after.

The deeper point is that IP and licensing risk in an Asian expansion is not primarily a legal risk. It is a commercial risk with a legal surface. The group that maps the registration position, the enforcement route, the regulatory classification and the tax implications before executing the licence is in a materially different position from the group that defers those questions to the operating phase. The cost of the former is a fraction of the cost of the latter.

For our cross-border practice, the technology licensing matters we have found most straightforward to manage – and most straightforward for the client – are those where the governing instruments, the regulatory perimeter and the enforcement route were treated as design inputs rather than afterthoughts. That is not a counsel's preference. It is the pattern that the disputes and structural failures show most clearly.

Related practices

Tech & Web3 – virtual-asset regulation, licensing, AML, and technology structures in Hong Kong and cross-border
Disputes & Arbitration – HKIAC arbitration, Mainland–Hong Kong enforcement, and cross-border interim measures
Tax Positions – FSIE regime, Pillar Two minimum tax, and IP-holding structure analysis across jurisdictions

The sequence above describes the standard position. Your matter turns on the specific IP assets, the jurisdictions actually engaged, and the regulatory classification of the technology – which is where the exposure is determined, not in the general framework.

For a structured assessment of your licensing and IP position across the relevant jurisdictions, write to us at info@lockhartyip.com.

Frequently asked questions

How does the cross-border element affect IP and licensing for a technology group expanding into Asia?

The cross-border element affects every material dimension of the arrangement: which registration covers the relevant territory, which court or tribunal can hear a dispute, and which regulatory regime applies to the licensed technology. A technology group licensing IP from a Hong Kong entity to a Mainland operating company is simultaneously managing Hong Kong IP registration, the enforcement architecture under the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) and HKIAC arbitration, and the regulatory classification of the product in both jurisdictions. These are not independent questions; the answer to each depends in part on the answer to the others. Groups that address them in sequence rather than in parallel consistently encounter preventable problems in the operating phase.

How long does IP and licensing for a technology group expanding into Asia usually take?

The timeline depends on the scope of registration work required, the complexity of the licence structure, and whether any regulatory approvals are needed. Hong Kong trade mark and patent registration follows standard statutory procedures; parties should seek current timeframes from the relevant registry. Where the licensed technology falls within the virtual-asset regulatory perimeter and the counterparty requires a VATP licence from the Securities and Futures Commission, that licensing process sets a separate and longer timeline that should be mapped at the outset. The structural and contractual work – entity establishment, IP assignment or licensing documentation, and ancillary agreements – can ordinarily proceed in parallel with the registration and regulatory steps, provided the sequencing is planned before the first commercial commitment is made.

Which jurisdiction's law applies to IP and licensing for a technology group expanding into Asia?

The governing law of a technology licence is, within the constraints of mandatory rules, a matter for the parties to agree. In our cross-border practice, English law and Hong Kong law are both commonly used for licences with an Asian cross-border dimension, given the familiarity of both systems to Mainland and international counterparties and the well-developed body of precedent on software and IP licensing. Overriding mandatory rules in the territory of performance – including Hong Kong's regulatory requirements for virtual-asset activities – will apply regardless of the chosen governing law. For that reason, governing-law selection is a starting point, not a complete answer to the compliance and regulatory position in each jurisdiction where the licensed technology operates.

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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.

Reading the risk in IP and licensing for a technology group expanding into Asia