Типичные ошибки и проблемы при лицензирования и продаже российских патентов в США by Dmitri Dubograev © 2010

Layman’s terms: source code, design, name/brand/title, knowledge, software. How do you describe this in legal terms and “dissect” your product: –Copyright to the software including the copyright to source code object code images texts Documentation (help etc.) Website –Trademarks –Patents –“know how” Determine what you have…

Bad “chain of title” of your property –Numerous people involved in the creation with no contracts –No registration of © and ®, hard to prove that it’s yours –Third party components –“starving student” problems (recent facebook lawsuit) Keep papertrail, register your rights Internal problems of ownership

Your exclusive rights to patents and related inventions –are you paid for the license to use your product or it’s just a cover to use embedded patents of your product in Licensee’s own product –need not to license patent if licensing the product –patent rights should terminate with the agt What rights are you giving up …

“License with royalty obligations for as long as the patent is valid” What happens if patent is invalid? Patent is challenged by Licensee or 3d party Breach of contract or patent damages? Licensor – must choose: –contract damage (license terminates) –infringement (patent) Licensee – may challenge with no risk Challenge of P in contracts …

Solution for licensors? –If Licensee challenges P, the license agt terminates (Medimmune problem) Can’t challenge P if Licensee is sued for royalties (patent or licensee estoppel) Litigation costs and the chances of winning for the Licensee versus the payment that is due – Do not refer to “Valid Claims” or “Valid patents” (licensor should try to avoid) –Tie royalty to other than patent (Zenith problem – patent is unenforceable if royalty is paid from products that do not use invention) Solution for Contract flaws…

Solution for licensors if Licensee challenges? –Termination or cancellation (retroactively) –“at will” –Increase royalties if challenges –Increase royalties if challenges if loses –Increase rate (“as if valid”) but refund some of the royalties if no challenge –Pay litigation costs of the winner Solution for contract flaws (2)…

Solution for licensors if Licensee challenges? –Pay all litigation costs –License after the litigation is over –In exchange for the products –License only when there is +Know-How and other Value (copyrights?) –Sell product (and no license) –Choose licensee carefully Solution for contract flaws (3)…

Who owns “changes”: –improvements, translations, connectors, customizations, adaptations, list of clients –Licensee may make changes –Licensee may ask Licensor to make changes Derivatives and owned by Licensor “New work” and owned by Licensee “License back” Derivatives and “new work”…

Determine if you wish to: –license your trademark to use only with your product (patented product?) protect the use by limited license and prohibiting “bad deeds” –co-brand (equal prominence?) –re-brand (aren’t you giving up the opportunity to take a ride on “powered by” if tagging on a larger mark) No “naked license” Trademarks license…

You have all the rights, so make sure that you name all of the rights that are giving up (otherwise Licensee tend to “take” them and more). Limitation of areas and markets –offline/online –documentation, website and related texts –end users/ product integrators –Geography, specific market, channels Copyright license grant…

Exclusivity, territory Cleary state what you allow: –use, test, reproduce, publish, integrate, brand, co-brand, re-brand, sublicense, market –Product as a “stand along” or in combination with other product (hardware and software) reservation of all of the other rights (ongoing supply to licensee?): –Licensor can keep changing the product, modify, modify, cease (IP violations?) –Licensee can ask for prior notice and compensation in case Licensor withdrew the product from the market. Grant (part2)…

“Promote and market” Compliance with laws (DMCA, UCITA, the US Patriot Act, OFAC regulations, BXA, privacy, Sarbanes-Oxley Act of 2002, FCPA) Pricing and end user licensing fees: –“Loss leader” (minimum price but problem “price fixing”) –Overcharging (and effectively promoting other products) –“Licensee is free to establish price” (but tricks – “refunds” and “free upgrades” and “product migration”) Not object or oppose any rights of Licensor taxes and 3d party licenses Feedback re Product Support (1 и 2 level; , phone) No misrepresentation and no “ethical business practices,” “no disparaging”… Licensee’s obligations…

Biggest issues: –“Affiliates entities” (“too many people”) –“Bugs” and their level fatal, severe, degraded, minimal impact –“Confidential Information” “independently developed” (really?) –“Intellectual property” (broad and narrow) –“Product”: narrow and broad definition Broad (incl. source code – for IP protection) Narrow (just object – for use) –Carefully defined object and source code Agreement’s defined terms…

Typical problems with licensing “Eternal” agreements (resellers etc) –Competition and “stealing” (ideas, people) Unintended “sale” to reseller instead of “license” (always keep your IP) Unlimited exclusivity –Fix: time + performance + territory No way out - no obligations, no milestones, no reps and warranties? –Easy fix: how about termination for breach?

Contact information Dmitri I. Dubograev ph: femidaUS site: