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