WWEMA Water & Wastewater Equipment Manufacturers Association Inc WWEMA Water & Wastewater Equipment Manufacturers Association Inc. Finance & Administration Council Meeting Licensing Agreements and Key Provisions Related to Intellectual Property and Managing Risks Paul Olszowka Michael Carrillo

Topics of Discussion Types and Attributes of Intellectual Property. Key Provisions of Licensing Agreements. Ownership Representations and Warranties Disclaimers Indemnification Limitation of Liability A Note About Insurance.

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Types of Intellectual Property and Their Attributes Topic 1 Types of Intellectual Property and Their Attributes

Features of Intellectual Property Legal protection for your designs, processes, and compositions. Provides a right to exclude; not always a right to practice. You need a court (and lawyers) to protect and enforce intellectual property rights – you can’t protect IP with a fence. IP can be “globalized.”

Four Types of Intellectual Property Patents Trademarks Copyrights Trade Secrets

Patents Granted by the federal government. Two types: Utility (apparatus or method): twenty year life. Design: fourteen year life. Right based on first to file the application. Three elements: novel, useful, and non-obvious. Requires significant investment of resources.

Trademarks Symbol (word, design, or image) that provides indication of source of origin. Granted by the federal government or acquired through use. Right to exclude others from using your trademark or service mark. Length of validity depends on use and renewal. Requires moderate investment of resources.

Copyrights Applicable to original written works and art of all types: novels, newspapers, photographs, operating manuals, instructions, etc. Right provided under federal law. Acquired automatically. Timely registration needed to obtain statutory damages and attorney fees. Many exceptions for “fair use,” education, and other purposes. Lengthy term of validity.

Trade Secrets Created by state law and (recently) federal law. Applies to formulas, methods, and commercial information. Examples include formula for Coca-Cola, recipe for Kentucky Fried Chicken, customer lists, etc. Perpetual duration, so long as kept confidential. Not registered.

Protection of IP Patents, trademarks, and copyrights, and trade secret laws all provide a right of private enforcement. Claim can be based on making, using, or selling. Remedies include injunctions (stopping infringement) and compensation in form of lost profits, license fees, and in some cases penalties and sanctions. Right to seek declaratory relief. Litigation is expensive.

Topic 2 Licensing Agreements

Overview Agreement from another (licensor) to use IP. Licensor may be owner or another licensee. Key provisions and issues. Ownership/Scope of rights. Representations and warranties. Indemnification. Limitation of liability. How are licenses used. Franchise agreements and other business arrangements Purchase and sale agreements Means to resolve or avoid IP litigation.

Ownership Issues with ownership: Does licensee combine its IP with licensed IP? Who owns derivative works of licensed IP? Who owns customizations based on licensed IP? What is scope of licensee’s right to practice: time, geographic, limits on use? How much are license fees? How are they calculated?

Warranties at Law UCC § 2-312. Warranty of Title and Against Infringement; Buyer's Obligation Against Infringement. * * * (3) Unless otherwise agreed a seller who is a merchant regularly dealing in goods of the kind warrants that the goods shall be delivered free of the rightful claim of any third person by way of infringement or the like but a buyer who furnishes specifications to the seller must hold the seller harmless against any such claim which arises out of compliance with the specifications.

Disclaimers NO WARRANTY: YOU EXPRESSLY ACKNOWLEDGE AND AGREE THAT USE OF THE LICENSED APPLICATION IS AT YOUR SOLE RISK. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE LICENSED APPLICATION AND ANY SERVICES PERFORMED OR PROVIDED BY THE LICENSED APPLICATION ARE PROVIDED "AS IS" AND “AS AVAILABLE,” WITH ALL FAULTS AND WITHOUT WARRANTY OF ANY KIND, AND LICENSOR HEREBY DISCLAIMS ALL WARRANTIES AND CONDITIONS WITH RESPECT TO THE LICENSED APPLICATION AND ANY SERVICES, EITHER EXPRESS, IMPLIED, OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES AND/OR CONDITIONS OF MERCHANTABILITY, OF SATISFACTORY QUALITY, OF FITNESS FOR A PARTICULAR PURPOSE, OF ACCURACY, OF QUIET ENJOYMENT, AND OF NONINFRINGEMENT OF THIRD-PARTY RIGHTS. NO ORAL OR WRITTEN INFORMATION OR ADVICE GIVEN BY LICENSOR OR ITS AUTHORIZED REPRESENTATIVE SHALL CREATE A WARRANTY. SHOULD THE LICENSED APPLICATION OR SERVICES PROVE DEFECTIVE, YOU ASSUME THE ENTIRE COST OF ALL NECESSARY SERVICING, REPAIR, OR CORRECTION. SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES OR LIMITATIONS ON APPLICABLE STATUTORY RIGHTS OF A CONSUMER, SO THE ABOVE EXCLUSION AND LIMITATIONS MAY NOT APPLY TO YOU.

Indemnity for IP Claims What is IP Indemnity? Transfers risk between parties. Agreement by you (or by another to you) to pay for IP litigation. Can cover both damages, costs of defense or settlement. Terms may be very sophisticated; e.g. provision will spell out rights of the parties in the event of entry of an injunction. Where are these provisions? Part of sales laws (UCC) for sales of products. Fine print in terms and conditions and click through provisions. Details in license agreements, sales agreements, or service agreements.

Features of Indemnity Provisions Scope: damages and costs of defense? Notification requirements. Limitation of liability/cap on maximum amount. Rights to participate in defense of the claim and settlement. Exclusions for misuse, combinations, or modifications.

Limitations of Liability Another way to minimize risk. May be used in combination with other provisions. Must be conspicuous, CLEAR and specific.

Features of Limitation of Liability What is maximum liability or cap? How is it determined? Percentage of fees. All fees. Fees over a period of time. Fixed dollar amount. Amount covered by insurance. Common exceptions. Third-party claims under indemnification provisions. Breach of confidentiality (and other restrictive covenants). Gross negligence, willful misconduct, or fraud.

Example TO THE EXTENT NOT PROHIBITED BY LAW, IN NO EVENT SHALL LICENSOR BE LIABLE FOR PERSONAL INJURY OR ANY INCIDENTAL, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES WHATSOEVER, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF PROFITS, LOSS OF DATA, BUSINESS INTERRUPTION, OR ANY OTHER COMMERCIAL DAMAGES OR LOSSES, ARISING OUT OF OR RELATED TO YOUR USE OF OR INABILITY TO USE THE LICENSED APPLICATION, HOWEVER CAUSED, REGARDLESS OF THE THEORY OF LIABILITY (CONTRACT, TORT, OR OTHERWISE) AND EVEN IF LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SOME JURISDICTIONS DO NOT ALLOW THE LIMITATION OF LIABILITY FOR PERSONAL INJURY, OR OF INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THIS LIMITATION MAY NOT APPLY TO YOU. In no event shall Licensor’s total liability to you for all damages (other than as may be required by applicable law in cases involving personal injury) exceed the amount of fifty dollars ($50.00). The foregoing limitations will apply even if the above stated remedy fails of its essential purpose.

Note on Insurance Another means to transfers risk of a transaction. Relation to indemnification and limitation of liability. Insurance can be secured to fund, in whole or in part, a indemnification obligation. Replace indemnification or limitation of liability. Issues to consider Who purchases? Deductibles/SIRs. Additional insured.

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