Practice Area
Licensing
We draft, negotiate and manage licences of software, brands, content, patents and know-how — for licensors protecting an asset and for licensees who need to rely on one. Cross-border royalties, tax and recordal are handled inside the licence, not discovered after it.
A licence is permission with a perimeter. The licensor keeps ownership; the licensee gets defined rights to use; and everything that matters — scope, exclusivity, territory, money, endings — lives in the drafting. Pakistan has no licensing statute as of mid-2026. The Contract Act, 1872 supplies the general law, and the IP statutes — the Copyright Ordinance, 1962, the Trade Marks Ordinance, 2001, the Patents Ordinance, 2000 — supply the property being licensed. The document does the rest.
We act for both ends of the transaction. For licensors, the work is protective: a grant no wider than intended, quality control that keeps a trademark defensible, improvement clauses that keep the technology yours, audit rights that make the royalty clause more than a request. For licensees, the work is reliability: confirming the licensor actually owns what it is licensing, securing the rights the business plan assumes — sub-licensing, territory, renewals — and making the exit survivable, with data, stock and customers accounted for.
Cross-border licences add a layer that domestic drafting habits miss. Royalties to a foreign licensor move through authorized dealer banks under the State Bank of Pakistan's foreign exchange framework, and they arrive net of withholding under the Income Tax Ordinance, 2001 unless a treaty says otherwise. We have seen carefully negotiated royalty rates fail at the bank counter because the agreement was not structured for remittance. So we design the payment machinery with the deal, and confirm the current parameters each time, because they move.
The recurring failure in Pakistani licensing practice is not bad drafting but borrowed drafting: a foreign template with intact references to statutes and registries Pakistan does not have, or a domestic template stretched over an asset it was never written for. A software licence, a brand licence and a process technology licence share a skeleton and almost nothing else. We keep separate precedents for each and resize them to the transaction, not the other way around.
Everything here is stated as of mid-2026. The foreign exchange and withholding positions in particular are confirmed at the time of each engagement, and recordal practice at the registries is verified rather than assumed.
When Businesses Need This
The moments this practice exists for.
- 01You license your software to enterprise customers and every one of them returns your template covered in comments you are not sure you can accept.
- 02A foreign principal wants to license technology or a brand to your Pakistani company, and the draft assumes registration systems and statutes Pakistan does not have.
- 03Your contract manufacturer needs your designs, specifications and know-how to produce — and nothing in writing stops them supplying your competitor with the same thing.
- 04You are taking an exclusive brand-and-distribution licence and cannot tell from the draft what happens to the customer base, the stock and the goodwill when it ends.
- 05Royalties need to move abroad every quarter and the bank wants State Bank-compliant documentation nobody prepared.
- 06A licensee has drifted beyond scope: new territory, new product lines, sub-licences you never authorized.
- 07You are buying a business whose value sits largely in inbound licences, and it is not clear they survive a change of control.
How It Works
The process, stage by stage.
1
Asset and ownership check
A licence is only as good as the licensor's title, so we start there: what exactly is being licensed, who owns it, whether it is registered, and whether the chain of title from creator to licensor is complete. For software this means tracing contractor and employee contributions; for brands it means the state of the register. Gaps found here are cheap; found in a dispute, they are not.
2
Term sheet
Before drafting, we fix the commercial skeleton on one or two pages: scope, exclusivity, territory, field of use, term, the royalty model and what happens at the end. Most licence disputes we see trace back to a point the parties never actually agreed, and a term sheet forces those points into the open early.
3
Drafting and negotiation
The licence is built under the Contract Act, 1872 with the machinery each asset type needs: quality control for trademark licences, delivery and escrow terms for software, improvement and grant-back provisions for technology, audit rights wherever royalties are computed from the licensee's numbers. We negotiate from a position paper, so concessions are priced rather than drifted into.
4
Regulatory, tax and recordal layer
Cross-border licences need the payment machinery: remittance of royalties and technical fees through authorized dealers under the State Bank of Pakistan's foreign exchange framework, and withholding under the Income Tax Ordinance, 2001 with any treaty relief documented. Where the licence covers registered rights, we advise on recordal with the Trade Marks Registry or the Patent Office and its effect [RECORDAL REQUIREMENTS — TO BE VERIFIED].
5
Life-cycle management
Licences are living contracts. We handle royalty audits and the disputes they surface, renewals and renegotiations, consents on sub-licensing and change of control, breach notices and cure periods, and — at the end — the post-termination sweep: cessation of use, return or destruction of materials, sell-off periods for stock, and survival of confidentiality.
The Legal Framework
The law this work runs on.
- Contract Act, 1872
- As of mid-2026 Pakistan has no standalone licensing statute; a licence is a contract, and the Contract Act governs its formation, performance, breach and remedies. Section 27 on restraint of trade shapes what non-compete and exclusivity promises will survive, and drafting works within it rather than around it.
- Trade Marks Ordinance, 2001
- Trademark licences sit under this Ordinance. Quality-control provisions are not boilerplate here: a mark licensed without control over how it is used invites challenge to the mark itself, and recordal of the licence with the Trade Marks Registry may carry procedural and evidentiary consequences [RECORDAL POSITION — TO BE VERIFIED].
- Patents Ordinance, 2000
- Patent licences and assignments are dealt with under this Ordinance, which also contains compulsory licensing provisions that a licensor pricing an exclusive Pakistani licence should at least know exist. Registration of a licence interest with the Patent Office, and its effect against third parties, is confirmed per engagement [REGISTRATION REQUIREMENTS — TO BE VERIFIED].
- Copyright Ordinance, 1962
- Software, content, documentation and artwork are protected as works under this Ordinance, which is why most software licensing in Pakistan is copyright licensing. The Ordinance imposes formalities on how copyright is assigned and licensed, and we paper transfers to satisfy them [FORMALITIES — TO BE VERIFIED].
- Electronic Transactions Ordinance, 2002
- Click-wrap acceptances, electronic signatures and online contracting draw their validity from this Ordinance. For SaaS and downloadable software it is the difference between an enforceable licence and a page nobody agreed to.
- Foreign Exchange Regulation Act, 1947 and the State Bank of Pakistan's Foreign Exchange Manual
- Outward remittance of royalties, licence fees and technical fees runs through authorized dealers under the SBP framework, historically Chapter 14 of the Foreign Exchange Manual. The current parameters and documentation are confirmed when the licence is structured [REMITTANCE PARAMETERS — TO BE VERIFIED].
- Income Tax Ordinance, 2001
- Royalties and fees for technical services paid to non-residents attract withholding tax, subject to reduction under an applicable double taxation treaty; the characterization of a payment as royalty or service fee changes the answer. Rates and treaty positions are confirmed per transaction [RATES — TO BE VERIFIED].
- Competition Act, 2010
- Exclusivity, tying and territorial restrictions in licence networks can engage the prohibition on anti-competitive agreements enforced by the Competition Commission of Pakistan. The risk is highest where the licensor holds market power or the restrictions run market-wide.
Statutory references are stated as of the page’s as-of date and flagged where verification is pending; the law moves, and the current position should be confirmed before relying on it.
Common Mistakes
The errors we see most — and their price.
- Calling the document a licence but drafting an assignment — or the reverse — and learning in a dispute which one was actually signed.
- Licensing a trademark with no quality-control provisions, which endangers the mark itself, not just the deal.
- Leaving improvements unaddressed, so the licensee walks away at term-end owning developments built on your technology.
- Agreeing royalties on "net sales" without defining net sales, permitted deductions or audit rights.
- Signing perpetual and irrevocable grants under commercial pressure without pricing what those words cost at exit.
- Assuming a foreign court judgment clause is enforceable in Pakistan when a foreign-seated arbitration clause would have been, under the 2011 Act.
- Structuring royalty flows to a foreign licensor without first checking State Bank remittance parameters and withholding tax — the payment clause then fails on first invoice.
- Ignoring change-of-control: the licence silently survives the licensee's sale to your competitor, or silently dies in yours.
Representative Scenarios
The shape of the work.
Illustrative scenarios, not case reports — composites drawn to show how matters of this kind run.
- —Illustrative: a Pakistani software house licensing to enterprise customers replaced a borrowed foreign template with a Pakistani-law licence built on the Copyright Ordinance, 1962 and the Electronic Transactions Ordinance, 2002, with a negotiation playbook so sales staff knew which clauses could move.Illustrative
- —Illustrative: a manufacturer taking foreign process technology restructured the payment terms after withholding tax and State Bank remittance requirements were priced in, avoiding a royalty rate the banking channel could not have serviced as drafted.Illustrative
- —Illustrative: a brand owner's royalty audit under an existing licence surfaced unreported channels; the matter settled on revised terms with audit machinery the original licence had lacked.Illustrative
- —Illustrative: a licensee negotiating an exclusive territory obtained a written improvements and grant-back clause after diligence showed its own engineers would be extending the licensed technology from month one.Illustrative
Questions, Answered
What clients ask about licensing.
The contract itself does not require registration to be valid between the parties. Where the licence covers a registered trademark or patent, recordal with the Trade Marks Registry or Patent Office may affect the licensee's standing and the licence's effect against third parties, and we advise on it case by case [RECORDAL POSITION — TO BE VERIFIED]. Cross-border royalty flows separately need the documentation the State Bank framework requires.
Copyright. As of mid-2026 software is protected as a work under the Copyright Ordinance, 1962, so a software licence is at bottom a copyright licence, and its scope language — installation, users, instances, territory — defines what the customer may lawfully do. Patents over software as such are a much narrower and less reliable route here, so the contract and copyright carry the load.
Yes, through an authorized dealer bank under the State Bank of Pakistan's foreign exchange framework, with the agreement and supporting documents in the form the framework expects, and withholding tax deducted under the Income Tax Ordinance, 2001 subject to treaty relief. Parameters and any caps are confirmed at structuring [TO BE VERIFIED]. We treat remittance as a design input, not an afterthought.
Exclusive means only the licensee may exploit the rights — even the licensor is out. Sole means licensor and licensee both may, but no one else. Non-exclusive means the licensor can grant the same rights to others. The words carry very different prices and very different termination stakes, so we make the draft say which one is meant rather than leaving it to argument.
Only if the contract says so — and the contract should say so expressly, either way. Silence invites dispute, and under the Contract Act, 1872 the answer will turn on construction of the particular document. We pair the sub-licensing clause with a change-of-control clause, because a licensee acquired by your competitor is the same problem wearing different paperwork.
Through the contract's own machinery: breach notice, cure period, then termination as prescribed, with the post-termination obligations enforced — cessation of use, return of materials, final royalty accounting. Skipping the sequence risks a wrongful-termination claim. Where the ex-licensee keeps using the rights, injunctive relief under the Specific Relief Act, 1877 alongside the relevant IP statute is the immediate remedy.
By contract and by control, because as of mid-2026 Pakistan has no standalone trade secrets statute. That means confidentiality clauses with real definitions and survival periods, need-to-know access, marked documents and an exhibit that identifies what the know-how actually is. A court asked to protect a secret first asks what the secret was and what the parties agreed about it; the licence should answer both questions.
Pakistani courts generally respect a genuine choice of foreign law in commercial contracts, but enforcing a foreign court judgment in Pakistan is slow and uncertain. A foreign arbitral award is enforceable under the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011, which implements the New York Convention. So for cross-border licences we usually accept a negotiated governing law but hold firm on arbitration.
The base and its definition, permitted deductions, currency and conversion mechanics, payment dates, gross-up or withholding treatment, reporting obligations, audit rights with a threshold that shifts audit costs to the licensee if underpayment is found, and interest on late payment. The rate is the number everyone negotiates; the definition of the base is where the money actually moves.
Who To Call
Related Insights
Prepared by The First Counsel · As of 2026-07-12 · Pending professional review — statements flagged in the text are being verified
This publication is provided for general information only. It is not legal advice, and neither reading it nor corresponding with the firm about it creates a lawyer–client relationship. The position stated must be verified against current law before it is relied upon.