Where IP and licensing for a technology group expanding into Asia stands now

A technology group moving into Asia arrives at a fork that most US and European IP counsel are not positioned to call. The question is not simply which law governs the licence. It is which system holds the assets, which court or tribunal has jurisdiction over a dispute, and whether an enforcement order can move across the boundary that matters most – the one between Hong Kong and the Mainland. These are not theoretical concerns. In our cross-border practice, they are the questions that drive structuring decisions before a single line of code is licensed or a trademark filed.

IP and licensing for a technology group expanding into Asia turns on three interlocking choices: the entity through which rights are held, the forum and governing law written into every licence, and the regulatory posture that applies when the technology touches virtual assets, data, or regulated services. Hong Kong, operating under the common-law system with a mature arbitration infrastructure and a direct connection to Mainland China, is the pivot point that experienced advisers build around. The cross-border interface between Hong Kong and the Mainland is the structural tension that all of this must resolve.

This analysis covers four areas: the commercial stakes, the governing instruments and how the cross-border interface bites, the comparative read across the systems, and our read on where the risk concentrates now.

What is actually at stake when an Asian IP expansion goes wrong?

The commercial consequences of a badly structured Asia entry can be immediate and lasting. A technology group that holds its IP in a poorly chosen entity may find that its most valuable asset – the bundle of rights that generates licence fees – is exposed to a jurisdiction it did not intend to engage, taxed in ways it did not model, and unenforceable in the market it most needs to reach.

Consider the common fact pattern: a European or North American group has built a software platform or a portfolio of registered and unregistered rights. It licenses into Asia through a mix of direct contracts and sub-licensing arrangements. Over time, the licensee base becomes concentrated in Greater China. The holding entity sits in a European jurisdiction, or in an offshore centre that has no mutual enforcement arrangement with the Mainland. When a licensee defaults or misappropriates, the IP owner cannot move. Its judgment or award is worth nothing where the infringer's assets sit.

The stakes are not limited to enforcement. Tax leakage on cross-border royalties, the absence of a double-tax treaty network, and the failure to establish economic substance in the holding entity are all loss events. They arrive quietly and compound. By the time a general counsel surfaces the problem, the group has often been mis-structured for two or three fiscal years.

What does a well-structured position actually look like? It starts with honest answers to three questions: where does the IP actually vest, who is the contracting party for each licensee relationship, and which system's courts or arbitral tribunals have agreed jurisdiction over every agreement in the stack. The answers drive everything that follows.

How do the governing instruments actually work across the Hong Kong–Mainland interface?

Hong Kong law governs a licence agreement when the parties choose it, and that choice is respected across a remarkably wide range of jurisdictions. The common-law system, English as an official working language of the courts, and the availability of the HKIAC as an arbitral institution are the practical reasons that sophisticated licensors in Asia choose Hong Kong as their contracting forum.

The Arbitration Ordinance (Cap. 609), modelled on the UNCITRAL Model Law, is the statute that underpins Hong Kong-seated arbitration. The HKIAC Administered Arbitration Rules, effective 1 June 2024, govern administered proceedings. Disputes under an IP or technology licence governed by Hong Kong law and referring disputes to HKIAC arbitration benefit from one of the most effective cross-border enforcement chains in the region.

That chain depends on the Arrangement on Mutual Enforcement of Arbitral Awards between the Mainland and the HKSAR – the bilateral mechanism that allows a Hong Kong arbitral award to be enforced in the Mainland, and vice versa, without going through the New York Convention (which, on its own, does not apply to cross-boundary Mainland–HK enforcement). The Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the HKSAR, in force since 1 October 2019, extends this further: a party to a Hong Kong-seated HKIAC arbitration may apply to Mainland courts for interim measures before or during proceedings. For an IP licensor whose licensee is based on the Mainland and whose assets – inventory, receivables, bank accounts – sit on the Mainland, this is a material practical tool.

On the judgment side, the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) came into force on 29 January 2024. It replaced the earlier choice-of-court regime and removed the requirement for exclusive jurisdiction clauses as a precondition to enforcement. The new regime applies to monetary and non-monetary judgments made on or after that date. For technology groups running disputes through court rather than arbitration, this regime opens the path to recognition and enforcement of Hong Kong court orders in the Mainland, and Mainland judgments in Hong Kong.

Neither mechanism is frictionless. The exclusion list under Cap. 645 catches certain intellectual-property categories. Parties should verify, before structuring, whether their specific IP dispute falls within or outside the exclusion perimeter. In our cross-border practice, the answer is not always obvious on the face of the claim.

How does the comparative read across Hong Kong and the Mainland change the structuring calculation?

The two systems are not mirror images, and the differences create both opportunity and risk for an inbound technology group. Hong Kong operates on a territorial tax basis: profits tax applies only to Hong Kong-sourced profits, at 8.25% on the first HK$2,000,000 of assessable profits and 16.5% above. There is no capital gains tax, no withholding tax on dividends or interest as a general position, and no value-added tax. For a holding entity receiving royalty income from Mainland or regional licensees, the question of source is therefore commercially significant.

The foreign-sourced income exemption (FSIE regime), in force from 1 January 2023 and subsequently amended, imposes economic-substance conditions on passive income – including royalties – received by a Hong Kong entity from foreign sources. An IP holding company in Hong Kong that is a shell cannot simply receive offshore royalties tax-free. It must demonstrate economic substance: sufficient people, premises, and decision-making activity in Hong Kong. This is a structural requirement, not a formality. Groups that ignore it face back-tax exposure and FSIE adjustments.

For groups within the scope of Pillar Two, the picture shifts further. The Hong Kong minimum top-up tax and income inclusion rule apply to in-scope MNE groups – those with consolidated global revenues of at least EUR 750 million – for fiscal years beginning on or after 1 January 2025. An IP holding entity in Hong Kong that benefits from low effective tax rates on royalty income may trigger a top-up liability at the parent level, or in Hong Kong itself if the effective tax rate on the relevant income falls below the global minimum. Modelling this before deploying a Hong Kong IP holding entity is not optional for large groups.

On the Mainland side, the position on royalties, withholding tax, and IP ownership registration is materially different. IP rights registered in China vest in China. The enforcement of those rights, including against infringers, runs through the Chinese courts or through arbitration agreed in the contract. A technology group that allows its Mainland operations to apply for and hold local IP registrations – rather than licensing in from an offshore or Hong Kong entity – may find that its most commercially significant rights are embedded in a jurisdiction from which extraction is difficult.

The comparative read produces a working principle: hold IP in the most enforcement-friendly, tax-efficient entity that can demonstrate genuine substance and that is connected to the Mainland enforcement chain. Hong Kong satisfies more of those criteria simultaneously than any other jurisdiction in the region. But it is not a passive answer. The substance requirements are real, the FSIE and Pillar Two conditions must be modelled, and the licence structure itself must be drafted to make enforcement tractable.

What does the regulatory layer add for technology groups touching virtual assets or data?

Technology groups expanding into Asia do not always arrive with a clean, simple IP profile. Increasingly, the product involves virtual assets, tokenised licensing, digital-asset infrastructure, or data services that engage regulatory regimes beyond standard IP law. In Hong Kong, those regimes have substance and consequence.

The mandatory licensing regime for centralised virtual-asset trading platforms – VATP licensing – applies under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, with the Securities and Futures Commission as the licensing authority. The regime commenced 1 June 2023. A technology group whose platform facilitates secondary trading in virtual assets, or whose licensing model involves a token with the characteristics of a security or futures contract, is inside this regime whether it intends to be or not. The regulatory analysis must precede the commercial launch, not follow it.

Where a virtual asset is a "security" or "futures contract" under the Securities and Futures Ordinance, the overlap between the VATP licensing requirement and SFC authorisation creates a dual-track compliance obligation. We regularly advise on the junction between the two, particularly where a technology group is licensing a software protocol or data product that is built on a chain but has a Mainland or regional user base.

The Anti-Money Laundering and Counter-Terrorist Financing Ordinance also applies to customer due diligence obligations and the FATF travel rule for virtual-asset transfers. A technology group operating a platform or payment infrastructure that routes value through virtual assets must implement these controls. The compliance file – records of customer identity, source of funds, transfer counterparties – is the document that regulators ask for when something goes wrong. The groups that survive regulatory scrutiny are those that built the file while the business was clean, not after a problem surfaced.

For stablecoin issuers, a Hong Kong Monetary Authority licensing regime for fiat-referenced stablecoin issuers commenced in 2025. Parties building products around fiat-referenced stablecoins should verify the current commencement date and perimeter before citing compliance with this regime. The rules are live; the details require verification against the current position.

Where does the risk actually concentrate now?

In our cross-border practice, we see four risk concentrations that are consistently under-managed by technology groups arriving in the region for the first time.

The first is entity sequencing. Groups often set up their Mainland or regional operations before the IP holding structure is in place. IP rights get filed in the wrong name, in the wrong jurisdiction, before a licence agreement exists. Unwinding this is slow and expensive. The corrective transactions – assignment of rights, intercompany licences, re-filing – each have their own tax, stamp duty, and regulatory implications. Correcting a filing error in the Mainland can take months and requires the co-operation of a Chinese entity that may by then have its own commercial interests in the IP.

The second is licence drafting at the cross-border interface. A licence agreement written for a US or European counterparty is not automatically suited to an Asian licensee relationship. The choice-of-law clause, the arbitration or dispute-resolution clause, the definition of permitted territory, and the royalty structure all need to be calibrated for enforceability in the jurisdictions where the licensee's assets sit. A licence that is unenforceability in the Mainland, because its dispute-resolution clause is unenforceable under Mainland civil procedure rules, is not a licence – it is a document.

The third is the substance gap. A Hong Kong IP holding entity that has no employees, no real decision-making, and no genuine economic activity is a shell. The FSIE regime does not protect it. Pillar Two may pierce it at the parent level. And on a regulatory inspection, it presents as a conduit rather than a substantive entity. Building genuine substance takes time: employing staff, maintaining premises, holding board meetings in Hong Kong with real authority over IP decisions. Groups that treat substance as a paperwork exercise – a set of documents rather than a real operational posture – are exposed.

The fourth is the regulatory blind spot. Technology groups that are not primarily financial-services businesses frequently assume that AML, VATP, and SFC requirements do not apply to them. In practice, the product description is less important than what the product does. If it facilitates trading, issues tokens, or routes value, the regulatory analysis is mandatory. The cost of getting this wrong is not just a fine. It is the inability to operate the product in Hong Kong and, increasingly, the Mainland.

There is a further structural point that experienced counsel raise and that groups often resist. The decision about forum and governing law is a decision about which enforcement chain you will use when you need it. Choosing English law, or New York law, governed by a European court, may feel natural for a US or European group. But if the licensee's assets are on the Mainland, an English court judgment is not directly enforceable there. An HKIAC award under Hong Kong law is. The choice of forum and governing law is not a technical preference. It is the enforcement architecture of the entire licensing programme.

The sequence above describes the standard analysis. Your matter turns on the specific documents, the jurisdictions actually engaged by your licensing stack, and the order in which the structural decisions are made – which is where the risk is won or lost.

To discuss how the cross-border interface applies to your IP holding and licensing position, contact info@lockhartyip.com.

What foreign IP counsel consistently get wrong at the Hong Kong–Mainland interface

We have acted on a number of matters that were initially structured by counsel who are authoritative in their home jurisdiction but who missed the specific mechanics of the Hong Kong–Mainland interface. The patterns repeat.

The first is the assumption that the New York Convention covers Mainland enforcement of a Hong Kong award. It does not, for cross-boundary enforcement between Hong Kong and the Mainland. The mechanism is the bilateral arrangement between the HKSAR and the Mainland. The practical implication is that the seat of arbitration matters: an award issued in Singapore or London requires a different – and generally slower – route into the Mainland than an HKIAC award seated in Hong Kong.

The second is treating Hong Kong tax neutrally because there is no withholding tax on dividends. The absence of withholding tax is real, but the FSIE regime means that royalty income from foreign sources may not flow to a Hong Kong entity tax-free unless the substance conditions are met. For large groups, Pillar Two adds a further layer of analysis. Treating Hong Kong as a zero-friction conduit is a position that does not survive a tax authority review.

The third is drafting licences in English with no consideration for whether the dispute-resolution clause will be upheld by Mainland courts if recognition is sought there. A licence written for a US counterparty, with an arbitration clause referring to a US arbitral institution seated in New York, is not a document that produces an immediately enforceable award in the Mainland. The institutional choice and the seat together determine the enforcement route. This is not a point that can be corrected retroactively once a dispute has crystallised.

A technology group that had licensed its core software platform into a Mainland entity came to us in the latter part of 2026 after the licensee had materially breached the agreement and the group's US counsel had commenced an arbitration in New York. The award was obtained. Enforcement on the Mainland required a full recognition proceeding that could have been avoided entirely with a different seat at the outset. We mapped the available routes under the mutual-enforcement arrangements and coordinated the recognition application alongside an application for interim measures in respect of the licensee's Hong Kong-held receivables. The matter moved within one cycle. The lesson – choose the seat before the licence is signed, not after the dispute – could not have been more practically illustrated.

If an earlier structure or enforcement attempt has produced a stalled or adverse result, a second read can identify the strategic error and the routes still open. Write to info@lockhartyip.com to discuss your position.

How does this analysis intersect with private wealth and capital-relocation decisions?

Technology founders and family offices that own or control the IP-holding entity face a second layer of analysis that is distinct from the corporate-licensing question but interacts with it directly. The founder's residence, the trust structure above the holding entity, and the succession plan for the IP portfolio are all connected to the same commercial asset.

A founder who is tax-resident in a high-withholding-tax jurisdiction and who holds the IP company through a European personal holding company has a materially different exposure profile from a founder who has relocated to a low-tax jurisdiction and holds through a well-structured trust with a Hong Kong trustee. The trust structure can isolate the IP-holding entity from forced-heirship claims in the founder's home jurisdiction – Hong Kong law has no forced-heirship regime – and from succession fragmentation.

The Trustee Ordinance (Cap. 29), substantially reformed with effect from 1 December 2013, abolished the rule against perpetuities for Hong Kong-law trusts and strengthened the statutory protection against foreign forced-heirship claims. A Hong Kong-law trust sitting above the IP holding entity is not a structure that should be dismissed as over-elaborate. For a founder with family members in multiple jurisdictions and a material IP portfolio, it is often the most commercially rational answer.

The interaction between the IP structure, the trust, and the tax position of the founder and the entity requires a coordinated read across at least three practice areas – tax positions, private wealth, and the tech-specific licensing and regulatory analysis. In our cross-border practice, we coordinate that read across the desk rather than sequencing it as three separate engagements. The result is a structure that holds together under pressure rather than one that was optimised in each dimension separately.

See also our analysis of digital asset fund structuring through Hong Kong and the Mainland and our briefing on cross-border SaaS and data agreements touching BVI. Our Tech & Web3 practice covers the full range of structuring, regulatory, and enforcement work for technology groups active in the region.

Our current read: where this is heading and what groups should be doing now

The regulatory environment in Hong Kong for technology groups – particularly those touching virtual assets, data, and cross-border payments – has consolidated materially since the VATP licensing regime commenced in 2023. The direction of travel is more regulation, not less, and the pace of change is faster than most corporate legal calendars can absorb.

The HKMA stablecoin licensing regime for fiat-referenced stablecoin issuers is live. The SFC's enforcement posture on unlicensed VATP activity has become more active. The FSIE regime, as amended, has closed the most obvious substance gaps. Pillar Two now applies to in-scope MNE groups for periods from January 2025. These are not future developments. They are the current operating environment.

The groups that are managing this well have done four things. They have structured the IP holding entity with real substance in Hong Kong – people, premises, decision authority – before deploying the regional licensing programme. They have written dispute-resolution clauses that produce enforceable awards in the Mainland, using HKIAC arbitration with Hong Kong as the seat. They have completed the regulatory analysis before product launch, not during it. And they have coordinated the IP, tax, and regulatory advice as a single read rather than three separate instructions.

The groups that are not managing this well have typically arrived at one of these points with a structure that was built in a different decade, for a different commercial reality, without advice calibrated to the current Hong Kong–Mainland interface. Correcting course from that position is possible. It is rarely cheap, and it is always slower than building correctly from the start.

For a structured assessment of your IP holding and licensing position across the relevant jurisdictions – Hong Kong, the Mainland, and the offshore centre in your current structure – write to us at info@lockhartyip.com.

Related practices

• Tech & Web3 – structuring, licensing, regulatory and enforcement work for technology groups in Asia
• Tax Positions – FSIE, Pillar Two and cross-border royalty structuring for technology holding entities
• Private Wealth – trust and succession planning above IP holding structures for technology founders

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Related

• Tech Web3
• Digital Asset Fund Structured Through Hong Kong Mainland 3
• Cross Border Saas Or Data Agreement Touching Bvi 3

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