A business law firm serving entrepreneurs, emerging growth companies and investors Licensing and Corporate Partnering An 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? Overview of Licensing Agreements Whale image: Archibald Thorburn [Public domain], via Wikimedia Commons

 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? Overview of Licensing Agreements