10 top tips to consider when thinking of licensing technology
Friday 1st April 2011There are many issues to consider when you are thinking of either taking a licence for a third party's technology or granting a licence of your technology to a third party.
Our ten top tips to consider are as follows:
- What is being licensed? Be precise. Is it a patent, know-how, other IP rights, a combination of all or some of the foregoing?
- Is it worth paying anything for what is being licensed? For example, if it is a patent being licensed, is it valid? How easy would it be to invent around it and thus avoid infringing the patent?
- What type of licence? Is it to be an exclusive, non-exclusive or sole licence - the answer will often affect the price paid/the royalties payable.
- Field of Use and Territory Will there be a limitation on the licensee, preventing them from exploiting the licensed technology outside a defined field of use/application/territory?
- Price How much is to be paid for the licence, and when is this payable? Will there be an upfront payment and/or ongoing royalty payments? If the latter, how will they be calculated? Will there be any minimum royalty payments?
- Warranties and indemnities Are you getting or giving any? For example, that the use of the licensed technology will not infringe anyone else's legal rights, such as their IP rights. If not, it may be sensible to carry out "freedom to operate" clearance searches, to make sure that the use of the licensed technology will not infringe anyone else's legal rights.
- Product Liability If the licensed technology will be used to make commercial products to be sold to others, who will be responsible for product liability claims? Is the licensor to have the right to exercise quality control over the finished products?
- Term What is the term of the licence and when and how can it be terminated early? For example, can it be terminated for no-fault, on a breach occurring, on an insolvency event arising, on a change of control of one of the parties, if the IP being licensed ceases to have any legal effect, etc.? What will and should happen on termination?
- Infringement What will happen if someone else infringes the licensed technology? Will the licensor be contractually obliged to take steps to prevent the infringement? Can the licensee take legal action? Is the licensee to be contractually obliged to assist the licensor to stop third party infringers? Who will pay for any such actions? Who will keep any damages that are recovered from the infringer?
- Competition law implications Are there any? For example, is the licence going to be between competitors? What is the market share of the parties? Will there be price fixing, or any allocation of territorial or other markets and/or customers between the parties? Will the licensee be obliged not to challenge the licensor's IP rights?
