Best Practices in LicensingBest Practices in Licensing

Diane M. ReedKnobbe, Martens, Olson & Bear

Rouz TabaddorVice President, Chief IP Counsel

Corelogic Information Solutions, Inc.

Diane M. ReedKnobbe, Martens, Olson & Bear

Rouz TabaddorVice 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

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Orange County, CASan Diego, CA

San Francisco, CASilicon Valley, CALos Angeles, CA

Riverside, CASeattle, WA

Washington, D.C.

Orange County, CASan Diego, CA

San Francisco, CASilicon Valley, CALos Angeles, CA

Riverside, CASeattle, WA

Washington, D.C.