INTELLECTUAL PROPERTY LICENSING Advantages to Transferring Intellectual Property Rights Abroad Avoid Costs of Exporting Goods Avoid Problems with Host Country Laws Minimal Capital Contribution in Form of Direct Investment Avoid Tariff Problems Minimal Legal Risks »Concerns about Host Country Laws, Conventions and Host Country Protection of Intellectual Property

INTELLECUTAL PROPERTY LICENSING Forms of Licensing of Intellectual Property –Technology Licensing-contractual arrangement in which the licensor’s patents, service mark, copyrights, or know how are sold or otherwise made available to a licensee for compensation. –Intellectual Property Licensing-selling or assigning statutorily granted rights to licensee. –Technology Transfer Agreements-additionally provides managerial assistance and know how.

INTELLECTUAL PROPERTY LICENSING Approach –Due Diligence –Licensing Agreement –Provisions –Common Clauses –Review of Typical Agreement –Law of Licensing Agreement –Foreign Transfer Restrictions

DUE DILIGENCE Due Diligence-in the exportation of intellectual property, licensor should do a due diligence review. Must Review Host Nations Approval System Must Review Registration Requirements domestically and in Host Nation –Copyright Acts in the United States »Requires filing and registration »Instrument of Transfer Agreement should be filed, signed and in writing

LICENSING AGREEMENT Provisions –Some Nations Will Not Enforce Certain Provisions in Licensing Agreement European Union –Gray Market Goods –Infringement –Tying Clauses –Excessive and Abusive Royalty Provisions –Excessive and Abusive Duration and Termination Terms

LICENSING AGREEMENT Common Clauses –Tying Provisions-requires the licensee to purchase supplies from the licensor or certified supplier –Territorial Restrictions-regulate where licensee may sell good or service. May violate Anti Trust Laws of Host Nation –Choice of Law-designate the law of licensor or licensee as country to resolve dispute. Remember significant contact.

LICENSING AGREEMENT Common Clauses –Grant Provisions-describes the rights of licensee along with restrictions Limitation of the right to Copy Clearly state licensor title to intellectual property No reverse engineering Termination of Rights of Licensee Exclusive-exclusive rights of licensee in specified territory or non exclusive

LICENSING AGREEMENT Common Clauses –Grant Provisions Field Use Restriction Duration of Grant Geographic Restrictions Goods not Re-enter into Licensor’s Country-Gray Market Goods –Very Controversial-can licensee control exports of secondarily sold goods –Agreement on Trade Related Aspects of Intellectual Property

LICENSING AGREEMENT Review of Typical Licensing Agreement –Preamble which includes identification of contracting parties and nature of agreement –Recitals-list rights that are being transferred –Definitional Terms-clarification of terms used throughout agreement –Channels of Distribution-licensor defines the appropriate avenues for sales for the licensed product

LICENSING AGREEMENT Typical License Agreement Reviewed –Covenant Not To Compete-licensee right to compete with licensor-heavily scrutinized provision of agreement by governments –Reservation of Rights of Licensor-licensor reserves all rights not expressly transferred to licensee. –Grant Back Provisions-licensor attempts to reserve future rights to improvements of goods.

LICENSING AGREEMENT Typical Licensing Agreement Reviewed –Royalty Clause –Computation of Sales »Gross Sales »Net Sales »Hybrid –Accounting and Record Keeping-sales of goods and costs associated with goods –Best Effort Clause-generate maximum sales

LICENSING AGREEMENT Typical Clauses of Agreement Reviewed –Indemnification Clause-indemnified for any liability stemming from licensor’s title or product –Disclaimer or Limited Liability Provisions –Warranty and Representation Clauses –Infringement Clause –Confidentiality Clause

LICENSING AGREEMENT Typical Clauses of Agreement Reviewed –Validity or no challenge clause-prohibit licensee from challenging the validity or exclusiveness of licensor’s intellectual property –Restriction on Assignment and Subleasing by Licensee –Non Partnership Clause or Independent Contractor Clause-licensee not acting as agent or partner of licensor

LICENSING AGREEMENT Typical Clauses of Licensing Agreement Reviewed –Choice of Law Clause –Termination Clause-specific grounds upon which agreement can be terminated Quality Control Non Payment of Royalties Violation of Specific Aforementioned Clauses

LAWS ON LICENSING Uniform Commercial Code-Article 2-sale of goods by merchant and mixed sales transactions United Nations Convention for the International Sales of Goods Uniform Computer Information Transaction Act »See Chapter 15 for mail box rule, statute of frauds, electronic agents, conditional acceptance and offer

FOREIGN TRANSFER RESTRICTIONS European Union –Anti-Trust Restriction –Unfair Competition Laws –Price Discrimination –Tying Agreements –Abusive Confidentiality Provisions –Quantitative Production Restrictions –Gray Market Goods

FOREIGN TRANSFER RESTRICTIONS Registration System or Prior Approval System China Government Intervention in the Agreement –Prior Approval by Ministry of Foreign Economic Relations and Trade »Restrictions on selection of materials »Restrictions on acquiring technology from competitor »Restrictions on Post Termination Use of Technology »Restrictions on Grant Back Clauses »Restrictions on Gray Market Goods