Production rights
Production rights consist of a licensing agreement between the purchaser and the seller (the contracting parties) to produce either goods or services domestically (i.e., licensed production) within the purchaser's state (country, nation, etc.). Production rights tend to be limited, and should be assumed as such, unless the seller specifically states otherwise.
Contents
Types
As noted above, there are different types of licensing agreements. There are:
- Unrestricted production rights
- Multi-national seller licensing/production rights
- Limited foreign and domestic licensing rights, and
- Domestic production rights
Unrestricted production rights (UPR) permit the purchaser to produce the goods or services to which the licensing agreement has been acquired for domestic and foreign use, and to resell those goods or services or even the production rights themselves. UPR agreements are very rarely released and must be specifically granted by the seller in each particular instance such rights have been released.
Multi-national production rights (MNPR or MPR) or jointly-held production rights (JHPR) are production rights established between firms or States that co-operated in designing and manufacturing a good or service (i.e., selling party). Individually, the selling parties are without capacity to contract (may not sign away production rights), and the purchasing party must purchase production rights after agreements have been reached with all of the selling parties. Examples of such MPR can be found on the storefronts of such firms as Portland Iron Works and Imperial Praetonian Shipyards, which have co-operated in designing a number of designs. The purchaser may not resell or reverse engineer either the good(s) or service(s) itself, or any production rights pertaining thereto that may have been acquired to any third party.
Limited foreign and domestic production rights (LFDPR) permit the purchaser to sell the goods or services acquired through the licensing agreement to third party buyers. Often LFDPR are qualified by the requirement of the seller receiving tacit or overt permission from the licensor (i.e., the firm or State that initially granted production rights) to sell the good(s) or service(s) to the third party.
As with MPR, the contracting party may neither resell to any third party any good, service, or production rights so acquired, nor reverse engineer any such acquisition. LFDPR may also be time- or quantity-limited (only for one-year or for 1000 units, etc.), subject to the terms of the agreement reached by the parties concerned.
Domestic production rights (DPR) permit only the domestic production within the purchaser's State of the good or service defined by the licensing agreement. Resale to any third party is strictly prohibited.
Should the purchaser default on the licensing agreement by breaching the provisions established therein, the contract is void and the purchaser may no longer produce or sell the good or service specified within the production rights agreement.
Cost of Production Rights
Each State or firm decides for what price its production rights for its goods or services may be bought. Smaller items such as firearms or tactical missiles might go for a set cost, or for a price such as calculated by a formula similar to the one below:
- (Cx × nx) + (Cx × y) × Nx
Wherein:
- Cx = Cost of the good or service (x)
- nx = Pre-assigned quantity of good or service (x), such as 2000 units, used for the base calculation of the cost for production rights (i.e., base production units or BPU number)
- y = percentage of Cx used to calculate the cost of each subsequent unit over the BPU
- Nx = The quantity of units produced above and beyond that established by the BPU
The seller should clearly state whether he or she is granting production rights in accordance with a set cost or based upon a formula such as that listed above. Should the seller use a formula similar to that above, he or she ought to clearly state the BPU number after which additional costs will be incurred.
