Patent Licensing Drafting

License Agreements for Patent

License agreement is a law in each state that is governed by a contract. It can also be governed by the federal government in cases that include federal matters, such as patents, trademarks, and copyrights. License agreements are like a contract because it looks to the future and includes trust between two or more parties. An Executory contract includes an exchange of money or other valuation in order to satisfy all parties.

The licensor is the one who owns the intellectual property. A licensee uses the intellectual property, much like a renter who uses the property within certain parameters in a contract. Due diligence refers how you research and investigate a licensee. You will need to research how they worked with other licensors and whether or not they have been involved in license agreement litigation in the past. If so, determine the cause of the litigation and make a final determination based on those results.

One thing to remember is that a licensee can also be a competitor, but the goal is a partnership. Negotiation refers to dealing with any reason one or more in a party would want to change any aspect of a contract. You can use it to enforce or alter preset limits that you are willing to accept or reject regarding the terms of an agreement.

When writing a license agreement, you must ensure that it is specifically relevant to those involved in negotiating the terms. The term definitions section of the agreement is crucial. It must be very clear and make sense even years into the future so that it can be easily interpreted.

In good faith, the agreement can include guaranteed royalties, which are those that need to be paid within a specified amount of time. It can also include a specific amount of money on marketing or research and development. This will demonstrate you effort to produce and sell your product per the terms in the agreement, particularly within an exclusive agreement.

The granting of a license is exclusive and provided to certain markets and territories in various countries. You will need to include those who are to be responsible for any product improvements, as well as who is charged with paying for product improvements.

Other terms that should be included in a license agreement include training and cooperation. You must also make all clauses and terms clear. Also, make sure you include what is and is not allowed within the agreement and under which conditions those allowances are permitted. You must also be sure to cover the march in rights.

A license agreement should have a licensor reservation, such as own or use. He or she will also disclose trade secrets and business plans, as well as other pieces of sensitive information to the licensee. The protections of this information must be included in the license agreement.

Also required in a license agreement:

Responsible parties with regard to corporate compliance, adherence to laws, international issues, and other regulations
Termination and renewal terms in order to protect licensor from a poorly performing licensee
Sales clauses, corporate mergers, and acquisitions terms so that competition does not have the opportunity to purchasing the licensee for their own use
Disclosure of the life of the intellectual property. This set the life of the license. Patents last for 20 years. Copyrights can last up to 120 years, and trademarks have no expiration date.
Royalty terms. Failure to pay royalties can result in penalties and possibly termination of the agreement.
Limits of the licensee. This limits the ability to produce and market products from competitive sources
Clause for bankruptcy in the event the licensee or licensor enters bankruptcy proceedings
Clauses pertaining to royalties and how they are paid, stocks, changes in longevity, and intellectual property strength
Clause that pertains to exclusivity, volume and longevity changes, foreign conversions, and licensee investment
Who pays the taxes
Licensee reporting and auditing information
Clause stating who will be in charge of maintaining intellectual property
Lists marking and who will be responsible in the event of infringement
Section detailing representation, indemnification, and warranties
Clause prohibiting licensee from challenging the intellectual property of the licensor as well as reverse engineering
Clause regarding the use of the name of the licensor
States who will pay for quality control of the product, types and amount of media exposure, customer service, as well as product redesign
Clause detailing who disputes will be handled, such as mediation, arbitration, the jurisdiction of litigation, and venue
State the finder’s fee liability
State employee selection and notice provisions
Section pertaining to rigs reservation. This disclaims any item that is not covered in the agreement.
Clause regarding modifying the terms for the agreement
Must include patent rights exhaustion, including double royalties clause on licensed product
Clause detailing attorneys fees and who will pay them
Include disclosure from licensee to licensor in regard to different planning and activities pertaining to the license
Conditions on licensee with regard to outside subject matter that is licensed, such as a franchise