Licensed production is the manufacturing of an object (e.g. a vehicle or engine) by one organisation (the licensee) with the authorisation, often for payment, of the organisation that owns the intellectual property of the design. For example a country with a less-developed aerospace industry may enter into an agreement allowing it to build under licence aircraft designed in another country. The licensed product may be supplied under its original name, or a different one.
The licensed product may be entirely manufactured by the licensee, or some or all of its parts may be supplied. Where the components needed to assemble a vehicle are supplied this is sometimes known as a knock-down kit. Buying in or importing goods entirely manufactured and assembled elsewhere and selling them under a different name is known as badge engineering.
The designing organisation typically provides assistance to the manufacturing organisation (the licensee), for example by providing design records, staff and training. It typically receives royalty payments.
For the licensee the advantages, compared with buying fully built, include providing local employment and technology transfer. In some cases the original manufacturer may have insufficient production capacity to satisfy demand. The costs of transport and tax may also be lower.
The licensee may modify the design (e.g. for local conditions) and assign a local name. If permitted by the licence, they may export or even sub-licence production.
Building under a licence is a legal way to use technology and know-how owned by others. The alternative, frequently illegal, is unauthorised copying (e.g. using reverse engineering or theft of the design).
Items that have been licence-built include:
- The F/A-18 Hornet by the Swiss Air Force
- The British Canberra aircraft design was licensed and developed further by the United States into the Martin B-57 Canberra.
- The British Leander class frigate was licence-built in Australia as the River class.
- The German Volkswagen Beetle was assembled under licence in several countries.
- Part of the American "Routechief" waste collection vehicle was licence-built in the United Kingdom by Shelvoke and Drewry.
- The Moulinex brand of small electrical appliances and kitchen equipment, owned by Groupe SEB, was required by the European Commission to be exclusively licensed for use in several European countries.