Licensing Agreement Terms

Many examples of licenses and agreements available

Actual form of clauses not important, content is

Clause by clause review doesn’t deal with language but the concepts

Business Terms - Use of a term sheet or Memorandum of Understanding

Reviewing the first draft Associated Documents

Not legally binding Statement of

background and intentions

Good place to identify problems such as conflicts of interest

What should be defined; avoided Capitalize defined terms External references to other material Consistency among agreements Reference appendices for variable

information Watch for ‘cut and paste’ definitions

Exclusive versus non-exclusive Transferable versus non-transferable Field of use / Territory Right to sublicense Use of Technology Grant of License to an affiliated

company Cross-licensing Improvements

Reservation of certain rights by the Licensor

Non-commercial purposes

Right to Sublicense Control over Sublicensing Approvals: consent versus notice, timelines Flow through provisions: indemnity, royalties What happens in the event of default of the

head licence (comfort letters) End licenses (often attached as an appendix) Obligation to submit copies of licences

Fully paid up Licenses Royalties based upon gross,

net or product sales Royalty “reach through” on sublicences Minimum royalties (creditable?) Milestone payments Interest on over-due amounts Stacking provisions Abeyance of payment pending results of

infringement action

Management may pass from licensor to licensee over time

Issues of control, report, consent and abandonment

Who pays? Who is the assignee? Obligation to mark or label licensed

products

Use and scope of an indemnity Limitation on amount of claim

Who wants them Who should give them What does a Licensor warrant?

› Different types of licensors› What can you actually control?

Ownership; non-infringement Disclaim technology “fitness for

purpose”

Permitted circumstances of disclosure What constitutes “confidential

information” Importance of confidentiality for trade

secrets or know-how

Report of activities with respect to exploitation of the technology

Frequency Right to audit Accounting

standards

Term of the license Events of termination

› Automatic (insolvency)› Curable breaches

Termination process Consequences to sub-licensees of

terminating the head licence

Public liability or product liability insurance

Absolute need for both in most circumstances

Indemnity vs. Insurance

Proper law of the contract Attornment clause

Marcel D. Mongeon+1 (905) 390 1818

marcel@mongeonconsulting.com