Best Practices in Licensing Diane M. Reed Knobbe, Martens, Olson & Bear Rouz Tabaddor Vice President, Chief IP Counsel Corelogic Information Solutions, Inc. Diane M. Reed Knobbe, Martens, Olson & Bear Rouz Tabaddor Vice President, Chief IP Counsel Corelogic Information Solutions, Inc.

© 2011 Knobbe Martens Olson & Bear LLP2 Who is the Licensee?  Defining the licensee  Affiliates?  Subsidiaries?  Sublicensees  Patent License  Trademark License: quality control  Software License Open Source issues

© 2011 Knobbe Martens Olson & Bear LLP3 Who is the Licensee?  Limiting Assignment of the Licensed IP  Licensee shall not grant, assign, sublicense or otherwise convey or transfer … without Licensor’s prior written consent and any attempted transfer or assignment shall be null and void.

Who is the Licensee?  Limiting Assignment of the Licensed IP  Except in connection with the sale or all or substantially all of the assets or business of Licensee, Licensee may not assign or transfer … without Licensor’s prior written consent.

Who is the Licensee?  Limiting Assignment of the Licensed IP  Licensor grants to Licensee a non-exclusive, non- transferable (except in conjunction with the sale of all or substantially all of Licensee’s business and assets related to the Project), non-sublicensable, perpetual, irrevocable, right and license to….

© 2011 Knobbe Martens Olson & Bear LLP6 Who is the Licensee?  Change in Control  Right to terminate for no cause  Specific termination right: Triggered by any change of control Require notice Licensor can terminate

© 2011 Knobbe Martens Olson & Bear LLP7 Who is the Licensee?  Right of First Refusal To acquire the Licensee To buy back the License

© 2011 Knobbe Martens Olson & Bear LLP8 Best Practices To Monitor Performance:  Monitoring the Licensee’s Performance  Paying on all Licensed Products?  Accurate royalty statements?  Are expenses properly deducted?  Complying with territorial restrictions?  Complying with market limitations?  Selling competitive products?  Properly using trademarks  Using proper patent marking  Sublicensee compliance?

© 2011 Knobbe Martens Olson & Bear LLP9 Best Practices To Monitor Performance:  Typical Auditing Provisions:  Types of records to be kept  How long to keep books and records  How frequently can you audit?  What time period can the audit cover?  Who pays for the audit?

© 2011 Knobbe Martens Olson & Bear LLP10 Best Practices To Monitor Performance:  Audit provisions:  What information do you need from the licensee?  How often do you need the licensee to report?  Requirement to keep books and records  How long must records be kept?  Who can inspect?  How often?

© 2011 Knobbe Martens Olson & Bear LLP11 Best Practices To Monitor Performance:  Practice Tips  Docket all payment due dates  Establish collection procedures  Keep records of all payments  Track trends in royalty reports  Review licensee press releases and financial reports  Review licensee product literature for new products

© 2011 Knobbe Martens Olson & Bear LLP12 Best Practices To Monitor Performance:  Why an Audit Might be Necessary  Royalty calculations are prone to mistakes  Accounting errors  Disagreements about which products are royalty bearing  Disagreements on how Net Sales are calculated  Identify payment deficiencies  Deterrent

© 2011 Knobbe Martens Olson & Bear LLP13 Best Practices To Monitor Performance:  Why an Audit Might be Necessary  Avoid statute of limitations  Feedback to improve future license agreements  Improve the licensee reporting process  Better understand how licensed property is used  Good deterrent, but expensive

© 2011 Knobbe Martens Olson & Bear LLP14 Best Practices to Avoid Unnecessary Risk  Representations and Warranties  Typical reps and warranties  Ownership  License to IP not owned  Right to grant the license  Validity – knowledge only  No Infringement – knowledge only

© 2011 Knobbe Martens Olson & Bear LLP15 Best Practices to Avoid Unnecessary Risk  Reps and warranties to avoid  Patent validity or scope  No infringement  Indemnification and Insurance

© 2011 Knobbe Martens Olson & Bear LLP16 Best Practices to Avoid Unnecessary Risk  Patent Marking  Persons found liable for false patent marking “[s]hall be fined not more than $500 for every such offense.”  Any person may sue for the penalty. One-half of the penalties go to the person bringing suit, and the other half go to the U.S.  In Forest Group, Inc. v. Bon Tool Co., 590 F.3d 1295 (Fed. Cir. 2009), interpreted the statute as requiring penalties be imposed on a per article basis

© 2011 Knobbe Martens Olson & Bear LLP17 Best Practices to Avoid Unnecessary Risk  Be very clear about patent marking requirements  Consider indemnification for false marking  Require licensees to police sublicensees

© 2011 Knobbe Martens Olson & Bear LLP18 Best Practices to Avoid Unnecessary Risk  Termination rights.  What are the triggers?  What happens on termination?  What if the license is irrevocable?

© 2011 Knobbe Martens Olson & Bear LLP19 Thinking About Dispute Resolution  Arbitration/Mediation – cast a broad net to cover all disputes  Disputes related to breach of the agreement  Disputes arising under the agreement

© 2011 Knobbe Martens Olson & Bear LLP20 Provisions Unique to the IP Being Licensed  Patent License  License rights under the patent  License rights to make a certain product covered by patents  Is Know-how included?  Ownership of improvements

© 2011 Knobbe Martens Olson & Bear LLP21 Provisions Unique to the IP Being Licensed  Trademarks  Quality control  Goodwill  Indemnification

© 2011 Knobbe Martens Olson & Bear LLP22 Provisions Unique to the IP Being Licensed  Copyright  Right to create derivative works  Written assignment of newly created works

kmob.com Orange County, CA San Diego, CA San Francisco, CA Silicon Valley, CA Los Angeles, CA Riverside, CA Seattle, WA Washington, D.C. Orange County, CA San Diego, CA San Francisco, CA Silicon Valley, CA Los Angeles, CA Riverside, CA Seattle, WA Washington, D.C.