Question 1:

Icarus Generators is an Australian manufacturer of solar-powered electrical generators. It specialises in manufacturing small, very mobile generators.Production of this type of generator is very new to Australia.

The Indonesian Ministry of Agriculture contacts Icarus Generators. It wishes to buy a large number of solar-operated electrical generators for use in remote villages in Indonesia. Butthe Ministry has no hard currency at its disposal to buy the generators. Accordingly, it has put an alternative proposal to Icarus Generators.

Under the Indonesian Ministry proposal, Icarus would grant to an Indonesian manufacturer exclusive license rights to all patents, trademarks and copyrights for its solar-powered generators.Icarus Generators would also provide all the technical drawings and know-how necessary to produce the generators, and a small team of technicians to assist in the establishment of the manufacturing plant.

The royalty fee payable to Icarus Generators would not be money, but instead 50% of the output of generators produced by the Indonesian manufacturer.Half of the 50% would be shipped to Icarus Generators itself in Australia at no cost other than the cost of transport and insurance, which would be borne by Icarus Generators. The other half would be shipped to a subsidiary of Icarus Generators in Malaysia, again at no cost to Icarus Generators other than the cost of transport and insurance.

Assume that Indonesian law prohibits the approval of foreign investment projects unless the project involves an Indonesian joint-venture partner or licensee that is entitled, under the joint venture agreement to retain full ownership of all technology and intellectual property at the end of the life of the project, which cannot last longer than 10 years.

Assume also that Indonesian law prohibits the approval of technology license agreements that contain any restriction on the rights of the licensee to make full use of any joint-venture technology and any improvements to such technology developed during the life of the project.

REQUIRED

Advise Icarus on the benefits, costs and risks involved in the proposed project and on how it could draft its agreement(s) with the Indonesian licensee to minimize the costs and risks and maximize the benefits.Would a licensing or joint venture arrangement or a combination of both be preferable. How should it be structured?