a business law firm serving entrepreneurs, emerging growth companies and investors licensing and...
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A business law firm serving entrepreneurs,emerging growth companies and investors
Licensing and Corporate Partnering
An Overview of Licensing Agreements
Overview of Licensing Agreements
Subject matter The license grant Restrictions Ownership Payment Representations and warranties Covenants Indemnification Limitation of liability
An Overview of License Agreements
Overview of Licensing Agreements
Nature of property: a bundle of rights • License is like handing out sticks in the bundle
Subject Matter: What Is Being Licensed?
Overview of Licensing Agreements
Comparison to land ownership – grant of right to pass over land• When? • For what purpose?• Who? • Transferable?• Pay each time?• Etc.
“Runs with” or encumbers the property • Vs. just a promise, which is personal to the
grantor
Subject Matter: What Is Being Licensed?
Overview of Licensing Agreements
Forms of property in question• Not land, but rather• Patents• Copyrights • Also
Trademarks Trade secrets Data Domain names
Subject Matter: What Is Being Licensed?
Overview of Licensing Agreements
Form of property: Patents • Government-sanctioned monopoly (right to exclude
others), granted in exchange for disclosure of an advancement
• In U.S., per patent code, protects: “new and useful process, machine, manufacture, or
composition of matter, or any new and useful improvement thereof”
• Not protected: Not new or useful Outside of enumerated categories, things like literary works,
compositions of music, compilations of data, forms of energy – these alone are not eligible for protection
• Filing required – this is the disclosure part• Can stop others from: making, using, selling, offering for
sale, importing
Subject Matter: What Is Being Licensed?
Overview of Licensing Agreements
Form of property: Copyrights • Protects certain expressions of ideas “fixed in
a tangible medium of expression” Not merely ideas
Story about a white whale? Melville’s Moby Dick? No Yes
Idea of a photo-sharing app? App - fixed in code? No Yes
Subject Matter: What Is Being Licensed?
Whale image: Archibald Thorburn [Public domain], via Wikimedia Commons
Overview of Licensing Agreements
Form of property: Copyrights • Exclusive rights to:
copy import/export create derivative works perform/display sell transmit
Subject Matter: What Is Being Licensed?
Overview of Licensing Agreements
Forms of property in question• Trademarks
rights granted in mark indicates source of goods or services
• Trade secrets something not generally known have used reasonable efforts to protect gives you an economic advantage
Subject Matter: What Is Being Licensed?
Overview of Licensing Agreements
Back to the land analogy• Patents, copyrights etc. are the legal form… (like
fee simple, condo, etc.) • But which plot of land? In other words, what
technology?
Subject Matter: What Is Being Licensed?
Overview of Licensing Agreements
IP rights comprising or relating to…• Certain technology?
For example: flowing from sponsored research, or made while an employee
• Improvements? Made by whom? When? With my materials (e.g., in my lab)? With my resources? Using my confidential information? Related to my business?
Subject Matter: What Is Being Licensed?
Overview of Licensing Agreements
Subject matter The license grant Restrictions Ownership Payment Representations and warranties Covenants Indemnification Limitation of liability
An Overview of License Agreements
Overview of Licensing Agreements
Patent License• Licensor grants to Licensee a royalty-bearing, exclusive,
non-transferable, non-sublicensable, license under Patent Rights in the Subject Technology to manufacture, have manufactured, distribute, have distributed, use, offer for sale, sell, lease, loan and/or import Licensed Products during the term, in the Field, in the Territory...
Copyrights • Licensor grants to Licensee a personal, non-
sublicensable, non-exclusive, non-transferable, license during the Term to: (a) use the Software on machines within Licensee’s network, (b) use the Software, in accordance with the Documentation, solely in accordance with the Software’s normal and intended use, (c) make a reasonable number of copies…
The License Grant – red bold are qualifiers describing the
sticks
Overview of Licensing Agreements
Subject matter The license grant Restrictions Ownership Payment Representations and warranties Covenants Indemnification Limitation of liability
An Overview of License Agreements
Overview of Licensing Agreements
Ying : Yang :: Grant : Restriction• No reverse engineering• Subcontractor restrictions• Market restrictions• Prohibition on using to make a competing product• Prohibition on providing benchmarking
info/reviews• High-risk activity restrictions • Negative cast of anything granted
Restrictions
Overview of Licensing Agreements
Subject matter The license grant Restrictions Ownership Payment Representations and warranties Covenants Indemnification Limitation of liability
An Overview of License Agreements
Overview of Licensing Agreements
Licensor maintains ownership of IP rights Who owns IP rights in: • New protectable subject matter?• Residual knowledge?• Feedback?
Ownership
Overview of Licensing Agreements
Subject matter The license grant Restrictions Ownership Payment Representations and warranties Covenants Indemnification Limitation of liability
An Overview of License Agreements
Overview of Licensing Agreements
Upfront fee Royalties (distinguish revenue sharing)
• $ per unit• % of revenue
Net or gross? For the whole company? Or [products that but for the license would infringe] Related services excluded? (Consulting, training, maintenance, support)
Share of sublicensing consideration Minimums
• Common with exclusivity Payment terms
• How frequently? (monthly, quarterly, annually)• How soon? (x days)• Interest if late?• Taxes?• Set-off?
Payment
Overview of Licensing Agreements
Subject matter The license grant Restrictions Ownership Payment Representations and warranties Covenants Indemnification Limitation of liability
An Overview of License Agreements
Overview of Licensing Agreements
Definition: statements describing state of affairs• “The Licensor is a corporation, duly organized…”• “The software performs in accordance with the
documentation”• Contains no viruses; has used C/R/E to ensure it contains
no viruses• Performance under this agreement will not conflict with…
Qualifiers• Materiality: e.g., “performs in all material respects”• Knowledge: shifting risk of the unknown
“To licensor’s knowledge, software contains no viruses”
Remedies upon breach: claim for damages; termination of agreement; repair or replace
Representations and Warranties
Overview of Licensing Agreements
Subject matter The license grant Restrictions Ownership Payment Representations and warranties Covenants Indemnification Limitation of liability
An Overview of License Agreements
Overview of Licensing Agreements
Definition: a promise to do / not to do something
Examples• Affirmative
Protect confidential information Diligent commercialization
• Hit certain milestones• Certain budget
Reporting comply with law Notify of infringers Carry insurance
• Negative Won’t disclose confidential information Won’t compete
Covenants
Overview of Licensing Agreements
Subject matter The license grant Restrictions Ownership Payment Representations and warranties Covenants Indemnification Limitation of liability
An Overview of License Agreements
Overview of Licensing Agreements
Allocation of risk between the parties for unfavorable developments: inter-party insurance• Claims, losses, damages, etc., arising out of…
Acts or omissions (any? or only those that are sufficiently bad; e.g., constitute negligence)
Violation of law by the other party Third party claims
• E.g., that there is something wrong with the product (product liability)
• E.g., that the product infringes that party’s IP rights
• Remedies: Defend? Indemnify? Make not-infringing? Get me a license? Refund?
Indemnification
Overview of Licensing Agreements
Subject matter The license grant Restrictions Ownership Payment Representations and warranties Covenants Indemnification Limitation of liability
An Overview of License Agreements
Overview of Licensing Agreements
Two main limitations• Certain kinds of damages excluded – consequential
damages Lost profit Reputational harm
• Cap on damages: At amounts received? Some other limit?
Examples of exceptions to the general rule (that certain kinds are excluded, or that damages are capped)• Violations of confidentiality• Bad acts• Breach of law• Indemnification obligations
Limitation of Liability
Overview of Licensing Agreements
Questions?