How to approach IP and licensing for a technology

A technology group crossing into Asia for the first time faces a question its domestic IP counsel cannot fully answer: which jurisdiction owns the rights, which agreement governs the licence, and where can the group actually enforce what it has built? The answer is rarely a single system. It sits at the intersection of the law where the IP is registered, the law of the territory where it is exploited, and the law of the hub through which royalty flows move.

For a technology group structuring its Asian expansion through Hong Kong, the governing instruments are the licence agreement itself – subject to the chosen governing law – the Anti-Money Laundering and Counter-Terrorist Financing Ordinance where payments carry regulatory exposure, and the Arbitration Ordinance (Cap. 609) where disputes must be resolved across borders. The structure must be set before the first commercial deployment: retrofitting it after exploitation begins is disproportionately expensive and, for some IP categories, simply unavailable.

This guide walks the sequence in order: the initial ownership and siting decision, the licence architecture, the AML and regulatory gate, the enforcement position, and the checklist a group should clear before launch. Each step identifies the gate that can stall or block progress if passed in the wrong order.

What decision does the group actually face at the outset?

The founding question is not "where do we register?" but "where does the IP sit in the group, and who controls it from there?" Those are two separate decisions, and conflating them is the single most common error our desk sees when a technology group arrives at the structuring conversation after a product is already live.

In our cross-border practice, we regularly advise groups that have built their product in one jurisdiction, incorporated their holding entity in another, and begun licensing to Asian counterparties through a third – without aligning the ownership chain to the licensing chain. The result is a structure in which royalties move through an entity that does not own the underlying rights, creating both a transfer-pricing exposure and a gap in enforceability.

The initial decision has three components. First, who legally owns the IP? Ownership must be clear as between founders, employees, contractors, and the corporate vehicle. Employment contracts and work-for-hire arrangements in the home jurisdiction determine this, and the analysis differs materially depending on whether the group is coming from a common-law or a civil-law system. Second, which entity in the corporate structure will hold the IP for the Asia-Pacific region? A Hong Kong intermediate holding company is a common siting choice: it sits within a common-law system, has no capital gains tax, and can access Hong Kong's treaty network and the court system for enforcement. Third, what form will the exploitation take – a direct licence to operating entities, a sub-licensing arrangement, or a technology-service agreement that wraps the IP in a service delivery model?

The answer to the third question determines the regulatory gate the group must pass. A pure licence is structured differently from a technology-service arrangement, and the AML obligations attaching to payments under each can differ. That gate is examined in Step 3 below.

Step 1: Confirm ownership and siting before any Asian counterparty sees the licence

Ownership confirmation is the gate that cannot be skipped. A licence granted by an entity that does not hold good title to the IP it purports to licence is unenforceable – and, in some civil-law systems, may expose the licensor to liability to the licensee.

The siting analysis for a Hong Kong intermediate holding company rests on several verified positions. The Hong Kong profits tax regime operates on a territorial basis: profits tax applies to Hong Kong-sourced profits only, with a two-tier rate of 8.25% on the first HK$2,000,000 of assessable profits and 16.5% above that. There is no withholding tax on dividends or interest in the general position, and no capital gains tax. For a group routing royalty income through a Hong Kong IP-holding entity, the foreign-sourced income exemption (FSIE – a regime requiring the holding entity to meet economic-substance conditions in Hong Kong) applies to foreign-sourced royalties and must be satisfied before the exemption is available. This is not an automatic position: it requires real activity, not a letterbox.

Economic-substance requirements under the FSIE regime, which has been in force from 1 January 2023 as amended, mean that the IP-holding entity must demonstrate genuine decision-making and management in Hong Kong. Staffing, board meetings, and key functions must actually occur in the jurisdiction. A group that establishes a Hong Kong IP-holding company and leaves it dormant will not satisfy the substance condition and risks losing the exemption on assessment.

For groups within the scope of Pillar Two – consolidated revenue at or above EUR 750 million – the Hong Kong minimum top-up tax and income inclusion rule apply for fiscal years beginning on or after 1 January 2025. The IP-holding structure must be modelled against that exposure before it is locked in.

The output of Step 1 is a clean ownership chain, a sited IP-holding entity with a credible substance plan, and a term sheet for the intra-group licence or assignment that moves the rights to the correct entity before external exploitation begins. Our desk typically prepares this as a structured memorandum before any external licence is drafted.

Step 2: Structure the licence agreement for Asian markets

The licence agreement for Asian markets must do three things simultaneously: define the scope of rights with sufficient precision to be enforced in each target jurisdiction, choose a governing law that the courts or tribunals of those jurisdictions will apply without friction, and select a dispute-resolution mechanism that actually reaches the assets.

Scope precision matters most for software and data-driven technology, where the boundary between a licence and an assignment can shift depending on the breadth of rights granted. A perpetual, irrevocable, royalty-free, worldwide licence of all rights looks like an assignment in most common-law systems and may be treated as one for tax and regulatory purposes. The licence must be scoped to what is commercially necessary – typically a field-of-use restriction, a territory restriction, and a sublicensing permission that is either express or withheld.

Governing law for Asia-facing technology licences most commonly falls to one of four choices: Hong Kong law, English law, Singapore law, or the law of the counterparty's jurisdiction. Where the counterparty is a Mainland Chinese entity, Mainland law will typically govern at least the sub-licence or distribution arrangement at the operating level. The interaction between Mainland law and the Hong Kong-law master licence is the interface that generates the most dispute exposure in our cross-border practice. Counterparties operating under Mainland law may have different rights on termination, different treatment of sub-licences on insolvency, and different default remedies for breach – none of which are preserved automatically by a Hong Kong-law choice-of-law clause in the master agreement.

Dispute resolution should be arbitration. A Hong Kong-seated arbitration under the HKIAC Administered Arbitration Rules (the 2024 Rules, effective 1 June 2024) gives the licensor access to emergency-relief proceedings, which are ordinarily completed within 14 days of file transmission, and to the interim-measures arrangement with the Mainland, which has been in effect since 1 October 2019. That arrangement allows a party to a Hong Kong-seated arbitration to seek interim measures – including property preservation – before Mainland courts. For a technology licensor whose counterparty holds assets in the Mainland, that is a material advantage. It should be built into the licence at the outset, not added later.

The sequence at Step 2 is: draft the master licence between the IP-holding entity and the Asian operating entity or distribution partner; prepare a form sub-licence where sublicensing rights are granted; and prepare the dispute-resolution clause with seat, rules, and language specified. The gate at this step is the formal execution of the intra-group licence before any third-party exploitation begins.

The sequence above describes the standard position for a typical technology licence structure. Your matter turns on the nature of the IP, the counterparty jurisdictions actually engaged, and the royalty payment mechanics – which is where the regulatory gate at Step 3 is either cleared or triggers a filing obligation. To assess that position across your structure, write to us at info@lockhartyip.com.

Step 3: Identify the AML and regulatory gate for royalty payments

Royalty payments flowing through a Hong Kong entity are subject to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance, which imposes customer due-diligence and record-keeping obligations on designated non-financial businesses and professions as well as on financial institutions. For a technology group, the regulatory question is whether any part of the structure engages a licensing category that triggers a formal filing, authorisation, or ongoing AML obligation beyond the general customer due-diligence duty.

Where the technology involves virtual assets – whether the group is a platform, a protocol, an infrastructure provider, or a service layer – the mandatory licensing regime for virtual-asset trading platforms (VATPs – centralised platforms for trading virtual assets) applies. The Securities and Futures Commission is the licensing authority under the VATP regime, which commenced 1 June 2023. A technology group whose product touches virtual-asset exchange, custody, or intermediation in any form must analyse whether its activities fall within the VATP perimeter before structuring the licensing arrangement. If any virtual asset in the structure constitutes a "security" or "futures contract" under the Securities and Futures Ordinance, a further licensing layer applies.

For groups whose technology involves the issuance or operation of fiat-referenced stablecoins, the Hong Kong Monetary Authority licensing regime for fiat-referenced stablecoin issuers commenced in 2025. Parties should verify the current commencement date and perimeter before treating their structure as outside that regime.

For a conventional software, data, or SaaS licensing model with no virtual-asset component, the AML gate is principally a customer due-diligence and source-of-funds question. Royalty-receiving entities in Hong Kong must maintain records and must not receive payments from sanctioned counterparties. Hong Kong implements United Nations sanctions; it does not give domestic effect to unilateral measures of other states. The sanctions compliance assessment must be performed at the counterparty-identification stage, before the licence is executed, and must be refreshed against current UN-designation lists on a defined schedule.

The gate at Step 3 is a written compliance determination: either a positive finding that no VATP or securities-law authorisation is required, or a regulatory authorisation filing where the product falls within scope. This determination should be documented before the first royalty payment is received.

Step 4: Build the enforcement position into the structure from the start

An IP licence is only as valuable as the licensor's ability to enforce it. In an Asian expansion, that means the structure must address three separate enforcement scenarios: a counterparty failing to pay royalties, a counterparty exceeding the scope of the licence, and a third-party infringer operating in a jurisdiction where the IP is registered.

On the first scenario – royalty default – the arbitration clause and the interim-measures arrangement discussed in Step 2 are the primary tools. A Hong Kong-seated HKIAC award against a Mainland counterparty can be enforced in the Mainland through the 1999 Arrangement and the 2020 Supplemental Arrangement. Since the 2021 amendment, simultaneous enforcement applications in both jurisdictions are permitted. This is a significant procedural advantage over a court-judgment enforcement route for groups whose counterparties operate primarily in the Mainland.

On the second scenario – scope breach – the licence must contain clear audit rights and a defined termination mechanism. In our cross-border practice, we have seen scope-breach disputes become protracted and expensive because the licence did not specify whether a sublicence granted in breach was void or merely voidable, and whether the sub-licensee was bound by the scope restrictions. The answer to both questions depends on the governing law. The licence should resolve it expressly.

On the third scenario – third-party infringement – the group must register its IP in each jurisdiction where it wishes to enforce. Registration in Hong Kong, in the Mainland, and in each material ASEAN jurisdiction are separate filings. A common misconception is that a Hong Kong registration or a Patent Cooperation Treaty application covers Mainland China; it does not. The Mainland requires a separate filing with the China National Intellectual Property Administration, and the group's counsel must manage the priority window from the home-jurisdiction filing if Paris Convention priority is to be preserved. Failure to act within that priority window is one of the most consistently damaging errors a technology group can make on its Asian expansion.

Our desk coordinates the licensing and enforcement architecture; formal IP-registration filings in each jurisdiction are handled with allied counsel admitted in the relevant jurisdiction.

What foreign counsel consistently get wrong

The most common error – and the one that costs the most to correct – is treating the Asian licensing structure as a translation exercise. A foreign-law licence is reformatted into a Hong Kong or Mainland-law equivalent, executed, and deployed. The group's counsel did not address the governing law interaction at the master-licence level, did not build in the HKIAC arbitration clause, and did not pass the FSIE substance gate.

A related error is the assumption that a technology group is categorically outside the VATP licensing regime because it does not consider itself a "crypto company". The scope of the VATP regime is broader than that self-assessment suggests. A platform that facilitates the exchange of any tokenised asset, or that holds virtual assets on behalf of users as part of a service delivery model, should analyse the position rather than assume an exclusion.

A third error is sequencing: executing the external licence with the Asian counterparty before completing the intra-group assignment or licence that gives the licensor entity its own good title. We have acted on cross-border matters where a commercial deployment was already six months old when the group discovered that the IP-owning entity and the contracting entity were different vehicles. Correcting that gap required an assignment, a tax analysis, and a set of confirmatory documents – a process that delayed the next financing round.

If an earlier filing, structure, or licensing arrangement produced an adverse or stalled result, a second read can identify the strategic error and the routes still open. Write to us at info@lockhartyip.com.

How does Hong Kong function as the hub for Asian IP licensing?

Hong Kong sits at a particular point in the Asia-Pacific IP chain. It is a common-law jurisdiction with an independent judiciary, English as an official working language of the courts, and a dispute-resolution infrastructure – centred on the HKIAC – that is tested and trusted by counterparties across Asia. The Court of Final Appeal remains Hong Kong's apex court, and its judgments carry weight in other common-law systems.

For a technology group licensing into the Mainland, Hong Kong's position as the jurisdiction whose seated arbitrations can seek Mainland interim measures is practically significant. No other offshore or neutral-seat jurisdiction has that direct procedural connection to Mainland courts. For a group licensing into ASEAN markets, Hong Kong's position as a common-law seat with New York Convention membership – and with a well-developed body of arbitral and commercial court practice – makes it a credible governing-law and dispute-resolution choice for counterparties who would resist submission to the home jurisdiction of a US, European, or UK licensor.

The territorial profits tax regime and the FSIE conditions mean that a properly structured Hong Kong IP-holding entity can receive foreign-sourced royalties under the exemption while maintaining commercial credibility as a hub. The structure must, however, be built with genuine substance – not as a vehicle for routing income without corresponding activity.

For groups at or above the Pillar Two threshold, the interaction between the IP-holding structure, the minimum top-up tax, and the FSIE regime requires modelling before the structure is committed. Counsel on our desk regularly see groups that have committed to a structure before that analysis is complete and must then manage the gap at the first reporting period.

Step-by-step decision checklist before first commercial deployment

The checklist below maps the gate at each step. A "no" answer at any gate indicates the step must be completed before proceeding to the next.

Gate 1 – Ownership confirmed. Is the IP formally owned by a legal entity in the group, with written agreements covering all founders, employees, and contractors who contributed to its creation? Have jurisdiction-specific work-for-hire and assignment requirements been satisfied?

Gate 2 – Siting decided and substance plan documented. Has the IP-holding entity been incorporated or designated, and is there a written substance plan sufficient to satisfy the FSIE economic-substance condition? Has the Pillar Two exposure been modelled where applicable?

Gate 3 – Intra-group licence or assignment executed. Does the IP-holding entity have good title to the rights it proposes to licence externally? Is the intra-group arrangement documented and executed before any third-party licence is signed?

Gate 4 – External licence drafted and reviewed. Does the licence contain a scope restriction, a governing-law clause, an HKIAC arbitration clause with Hong Kong as seat, and an audit and termination mechanism? Has the interaction between the governing law and Mainland law been addressed where the counterparty is a Mainland entity?

Gate 5 – AML compliance determination documented. Has the group assessed whether its product falls within the VATP or securities-law perimeter? Has a customer due-diligence and sanctions-screening process been established for royalty-paying counterparties?

Gate 6 – IP registration in target jurisdictions confirmed or filed. Is there a filing programme covering the Mainland, Hong Kong, and each material target jurisdiction? Have Paris Convention priority windows been identified and entered in a docketing system?

Gate 7 – Enforcement architecture in place. Does the group have a written enforcement protocol covering royalty default, scope breach, and third-party infringement? Are allied counsel identified in each jurisdiction where enforcement may be required?

Clearing all seven gates before first commercial deployment does not prevent disputes. It does mean that when a dispute arises – and in cross-border technology licensing, disputes do arise – the group is positioned to act rather than to reconstruct.

To discuss how this sequence applies to your cross-border structure and the jurisdictions actually engaged, contact info@lockhartyip.com.

Related practices

Tech & Web3 – licensing, VATP regulation, AML and virtual-asset structuring through Hong Kong
Disputes & Arbitration – HKIAC-seated arbitration, cross-border enforcement and interim measures

Frequently asked questions

What is the first step in IP and licensing for a technology group expanding into Asia?

The first step is confirming clean ownership of the IP within the group and deciding which entity will hold the rights for the Asia-Pacific region. A licence granted by an entity without good title is unenforceable, so the ownership and siting decision must be completed before any external licence is executed. For a Hong Kong intermediate holding entity, this step also requires a written substance plan to satisfy the foreign-sourced income exemption conditions under the FSIE regime, which has applied from 1 January 2023 as amended.

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

The governing law depends on the structure. A Hong Kong-law master licence between the IP-holding entity and an Asian operating entity is common for groups that have sited their IP holding in Hong Kong. Where the counterparty is a Mainland Chinese entity, Mainland law will typically govern the sub-licence or distribution arrangement at the operating level, creating an interface between the two systems that must be addressed expressly in the licence. Dispute resolution is most reliably handled through a Hong Kong-seated HKIAC arbitration clause, which gives access to the interim-measures arrangement with Mainland courts.

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

The structuring sequence – ownership confirmation, siting, intra-group licence, external licence, AML determination, and registration programme – typically runs over several months for a group starting from scratch. Where IP registration in multiple jurisdictions is required, the filing programme continues in parallel with commercial deployment. The constraint is not the drafting time; it is the time needed to satisfy the FSIE substance conditions, complete the AML compliance determination, and coordinate filings with allied counsel in each target jurisdiction. Groups that start the process before the first commercial conversation are materially better placed than those who begin after a counterparty is identified.

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

How to approach IP and licensing for a technology group expanding into Asia