4. Marketing Technology Assets in the U.S.

This is our third  post in our series “U.S. Market Entry for Italian Enterprises” covering  the marketing and distribution of  technology assets  within  the U.S. marketplace. This series follows a sequential methodology arranged in accordance with  the level of risk which each market entry modality presents to the Italian enterprise. Accordingly, each subsequent modality will exhibit a higher level of risk as well as reward.

We have distilled our many years of working with Italian clients marketing their technology-centric products[1] into the following basic tenets for successful U.S. market penetration:

  1. Whole Product – must be the “whole product” with not one single feature absent or missing as well as supported by complete supply chain and readily available 24/7 tech support;
  2. Referenceable –  need positive references from end-users as tech buyers will not purchase unless product or service is clearly referenceable; and
  3. Solves a Problem – must solve a real customer problem or is a bona fide disruptive solution

Of course, there are other product  attributes for successful US technology sales but we have witnessed at least one of the above factors always present in a failed product launch within the U.S. marketplace.

Equally important, marketing technology-centric products into the U.S. marketplace significantly raises the risk profile for an Italian organization as its valuable tech assets are exposed in some degree of fashion to competition as well as unlawful use. In this context, the following modalities of technology distribution into the U.S.  marketplace is profiled from their respective risk level as well as their utility in terms of affording legal protection.


The Value-Added Reseller (“VAR”).  With any technology centric product, it is invariably sold in a consultative manner where the customer is provided professional technical assistance in the deployment and use of the product. Thus, in terms of marketing and distributing  tech products, the services of a VAR is required. Specifically, VAR’s are sales professionals steeped in the subject technology at hand and have full command of the intricacies of a particular technology or solution. VARs are often referred to as “System Integrators” as well.  Much like a generic sales agent or distributor, a VAR agreement follows the same format in principle but differs significantly in terms of the intellectual property protections built into the VAR agreement as follows:

  • License Grant – the intellectual property underlying the subject product or system (“IP”)  is made available to the VAR under a  License  Grant for a defined Term;
  • License Terms – IP remains the sole property of the Licensor and the VAR’s right to market and sell will be within a defined territory(exclusive or nonexclusive);
  • VAR’s Grant of Licensed Technology and associated IP is restricted to defined fields of use  or markets;
  • Patents under license – will be identified with prohibition on attacking any patent rights of Licensor;
  • Software License – may follow SaaS model where software provided over the Internet or via cloud application with defined terms of use and data protection;
  • Compensation – can take different forms such as buy-resell from Licensor or royalties paid upon sales;
  • Sales quotas or benchmarks may be in play in order to maintain VAR’s license rights;
  • Training – Licensor provides training to VAR and supporting materials;
  • Warranty – specifics terms of pass thru warranty to ultimate end-user with defined time  limits as well exclusions from warranty such as wrongful use ;
  • Licensor will warrant IP rights under license in terms of ownership and infringement with limitations;
  • Reverse Engineering Prohibition;
  • Termination for breach of License Terms;
  • Dispute Resolution – if arbitration specified, must have carve-out for the Italian licensor to seek injunctive relief  in court of law for IP breach; and
  • Choice of Law – in general, US state courts do not discriminate against foreign licensors and are very protective of IP rights.

In sum, VARs and Systems Integrators in the U.S. serve as reliable  and profitable sales channels to market while simultaneously lowering the risk of intellectual property rights dilution as well as  from its unlawful use.


Onshore Production License.  In many instances, the Italian enterprise may elect to transfer the  rights to produce, assemble or manufacture   its technology to third parties domiciled in the U.S. This is accomplished via a comprehensive IP license agreement which permits the authorized  production, assembly or manufacture in accordance with defined  production parameters and with comprehensive IP protection. Many of the same IP protections found in a VAR agreement are replicated here in the confines of a  production license but with significant expansion of the manner and methods by which onshore production is to be undertaken and managed in accordance with the Italian licensor.

However, the risk and reward aspects of this  modality must be completely understood as they are of significant consequence.  With respect to inherent risk, the onshoring of critical production technology must be viewed from a semi-permanent perspective as local  production assets will be domiciled upon foreign soil under the direct control of a third party licensee. In the event the relationship with the local licensee sours or proves to be a loss-making investment, it often proves difficult to retake possession of the production assets and find another licensee elsewhere.

Moreover, in the event the Italian licensor and licensee enter into an equity joint venture (‘JV”) where an independent entity is formed with capital stock issued   to each party, under no circumstance should the Italian licensor’s capital contribution be the technology license itself. Capitalizing the IP license  will result in the license’s recordation as an asset upon the JV’s balance sheet and as such, may be subject to the reach of creditors in any restructuring or insolvency of the JV, resulting in the Italian licensor’s  complete loss of its valuable technology.  Rather, capital contributions into the JV should be paid in cash and/or debt and once capitalized, then the Italian licensor can freely license the subject technology in an arms-length license agreement with the JV, thus removing the license from the reach of any JV  creditor.

On the flip side, the economic benefits from a successful production or manufacturing  license are far greater than those earned thru a VAR sales channel as production licenses  extract economic rents in the form of royalties. These rents are not only significantly higher than mere sales channel revenue but production licenses often spin-out additional forms of revenue such as consultive and  technical services.

In sum, like any other capital investment decision, the risks and rewards of a production or manufacturing license project must be carefully weighed before undertaking any such endeavor.


Our next series of posts will venture into the realm of foreign direct investment onto U.S. soil whereby permanent investment capital is brought onshore for the long term.

[1] For purposes of this post,” “technology-centric products” or “products” refers to  technology services as well.