Design Licence Agreement (Hong Kong)

A Design Licence Agreement in Hong Kong sets out the scope, fees, and conditions on which the licensor permits the licensee to use the rights.

Registered design protection under the Registered Designs Ordinance (Cap. 522) is administered by the Intellectual Property Department (IPD) of the Hong Kong SAR Government. A design must be registered with the IPD to benefit from Cap. 522 protection. Registration gives the design owner the exclusive right to use the registered design in Hong Kong for an initial period of five years from the date of the application, renewable in five-year increments for up to a maximum protection period of 25 years. The design must be new at the date of application — prior disclosure of the design before the application date defeats novelty and prevents registration. A Design Licence Agreement should reference the registered design number and the current registration expiry date.

Copyright protection for designs under the Copyright Ordinance (Cap. 528) arises automatically upon creation of an original artistic work, without any registration requirement. Copyright in an artistic work vests in the author as first owner under Section 14 of Cap. 528, except where the work is created by an employee in the course of employment — in which case the copyright vests in the employer. Copyright in an original design drawing, logo, or graphic lasts for the lifetime of the author plus 50 years under Section 17 of Cap. 528. However, Section 70 of Cap. 528 limits copyright protection for designs applied industrially: once a design has been applied to more than 50 articles commercially, the copyright protection period is reduced to 25 years from first commercial marketing. A Design Licence Agreement covering both registered design rights and underlying copyright confirms complete protection for the licensor.

The Intellectual Property Department also administers Hong Kong's participation in international design protection systems. Hong Kong designs can be protected internationally through the Hague System for the International Registration of Industrial Designs administered by the World Intellectual Property Organization (WIPO), and Hong Kong businesses frequently seek to protect their designs in mainland China through the China National Intellectual Property Administration (CNIPA) in parallel with Hong Kong registration.

Under the Inland Revenue Ordinance (Cap. 112), royalty income received by a Hong Kong-resident licensor from a Design Licence Agreement may be assessable to profits tax at 16.5% if the licensor carries on a business in Hong Kong and the royalty arises in or is derived from Hong Kong. The assessable amount depends on whether the royalty is characterised as a capital or revenue receipt.

A Design Licence Agreement in Hong Kong is needed whenever the owner of a registered or unregistered design right wishes to authorise another party to use that design commercially, without transferring ownership of the design right itself.

A Hong Kong fashion designer or product design studio that has developed distinctive product aesthetics — protected by registration under the Registered Designs Ordinance (Cap. 522) or as copyright in artistic works under the Copyright Ordinance (Cap. 528) — and wishes to licence those designs to a manufacturer or retailer for commercial production needs a Design Licence Agreement. Without a formal licence, the manufacturer or retailer has no authorisation to use the design and may infringe the designer's intellectual property rights.

A technology company whose product design — hardware casing, interface layout, or industrial design — is registered with the Intellectual Property Department under Cap. 522 and which wishes to authorise a contract manufacturer in Guangdong or elsewhere to produce goods incorporating that design for sale in Hong Kong and export markets needs a Design Licence Agreement specifying the permitted territory, production volumes, quality control standards, and royalty or licence fee arrangements.

A brand owner who has licensed their trademark to a licensee and wishes to simultaneously licence the associated product design to confirm visual consistency between the trademark licence and the design application needs a Design Licence Agreement that dovetails with the trademark licence — covering the same territory, distribution channels, quality control requirements, and term.

A company acquiring a business that includes licensed design rights — where the target company holds a design licence from a third party — needs to review the existing Design Licence Agreement to confirm whether the licence is assignable to the acquirer, and may need a new or novated Design Licence Agreement to regularise the licensor relationship post-acquisition.

A Hong Kong design school, university, or incubator that has developed designs in collaboration with students or researchers, where intellectual property rights may be shared between the institution and the creators, needs a Design Licence Agreement to formalise the authorisation for commercialisation, royalty-sharing, and quality control arrangements.

A licensor whose existing Design Licence Agreement is approaching expiry and who wishes to renew the licence on updated terms — for example, extending the territory, adjusting the royalty rate in line with market conditions, or expanding the permitted product categories — needs a new or amended Design Licence Agreement to document the renewed terms.

A Design Licence Agreement in Hong Kong governed by the Registered Designs Ordinance (Cap. 522) and the Copyright Ordinance (Cap. 528) must include the following key elements to be legally effective and commercially protective for both licensor and licensee.

Party identification: Full legal names and addresses of the licensor and licensee. For companies, the Companies Registry registration number under Cap. 622 should be stated. The licensor must be the registered owner of the design right (or the holder of an existing exclusive licence with sub-licensing rights) to have authority to grant the licence.

Design identification: A precise description of the design being licensed — for registered designs, the registered design number, the registration date, the current registration expiry date, and the Intellectual Property Department (IPD) certificate reference; for unregistered designs protected as copyright under Cap. 528, a description of the artistic work and the first date of creation or publication. Attaching the registered design certificate or a copy of the design drawings as a schedule to the agreement eliminates ambiguity about what is being licensed.

Scope of licence: The specific uses for which the licensee is authorised to use the design — the types of products or product categories on which the design may be applied, the distribution channels permitted (wholesale, retail, online, export), and any restrictions on use (for example, prohibiting use on categories of goods that compete with the licensor's own products).

Territory: The geographic scope of the licence — whether limited to Hong Kong SAR, extending to mainland China, or covering other specified jurisdictions. The Registered Designs Ordinance (Cap. 522) protects designs only in Hong Kong; separate licence rights for mainland China require authorisation under China's Design Patent regime administered by the China National Intellectual Property Administration (CNIPA).

Exclusivity: Whether the licence is exclusive (only the licensee may use the design in the licensed territory — the licensor cannot use or licence the design to others within that scope) or non-exclusive (the licensor can grant other licences concurrently). An exclusive licence under Cap. 522 must be in writing and signed by the licensor to be legally effective as an exclusive licence.

Royalties and fees: The royalty rate (expressed as a percentage of net sales of licensed products) or a fixed licence fee, the royalty reporting period (quarterly or semi-annually), the payment currency (HKD, with no GST or VAT applicable), audit rights allowing the licensor to inspect the licensee's sales records to verify royalty calculations, and minimum annual royalty commitments (if any). Under the Inland Revenue Ordinance (Cap. 112), royalty payments may be subject to withholding tax deductions depending on the tax residency of the licensor.

Quality control: The licensor's right to approve samples of products incorporating the licensed design before commercial production commences; the right to inspect commercial production runs and the licensee's manufacturing facilities; compliance with quality standards consistent with the Consumer Goods Safety Ordinance (Cap. 456); and the consequences of quality non-compliance, including the licensor's right to terminate the licence for repeated quality failures.

Design marking: Whether products bearing the licensed registered design must carry the 'RD' marking (indicating a registered design under Cap. 522) or a copyright notice, and whose responsibility it is to apply those markings.

Infringement: Provisions addressing how third-party infringement of the licensed design will be handled — who has the primary right to bring infringement proceedings, who bears the cost of litigation, and how any damages or settlement proceeds will be shared between licensor and licensee.

Term and termination: The duration of the licence (subject to the maximum 25-year registration period under Cap. 522), renewal options, events triggering early termination (material breach, insolvency, change of control of the licensee, or cessation of the principal's registration), and the consequences of termination for products manufactured or in distribution at termination.

Moral rights: Where the designer of the licensed work is an individual, the right of integrity under Section 89 of the Copyright Ordinance (Cap. 528) — the right to object to derogatory treatment of the design — applies. The licence should include a waiver of moral rights by the designer to permit the licensee to adapt and use the design without crediting the author or seeking approval for adaptations. Forms-legal.com provides this template as a practical starting point; professional advice from a Hong Kong intellectual property solicitor is recommended for commercially significant design licences.