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Experienced Innovator Guide |
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Licensing |
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In this Section
Patent license agreements are based on two bodies of law:
A typical agreement is outlined below. The headings shown are representative of the kinds of things you should think about (and cover) in a patent license agreement. Your actual agreement may have different headings, more or fewer, and the points mentioned may be covered in different order. It is important only that you give thought to these points, and make certain they're covered somewhere. Note that these points are generally applicable to license of other intellectual property rights. Note also that the main difference between a license and an assignment is that the former provides that the Licensor retains legal title of the property and the latter does not. We urge you to retain an attorney or agent in the preparation and negotiation of your agreement; and, in particular, one who clearly understands the problems encountered under intellectual property law. Heading-Parties-Date. This agreement is effective as of such-and-such a day, by and between you, your address (hereinafter referred to as Licensor), and ABC Company, a corporation of Michigan, their address (hereinafter referred to as Licensee). Recitals-Background. Material to aid in interpreting the agreement. It's usually not a binding part of the agreement, but may be made so if the attorney desires. Construction is generally along the following lines: Witnesseth, Whereas John Doe is the inventor of such-and-such, and has patents related to such-and-such, and Whereas, ABC Company is in the business of manufacturing such-and-such, and is interested in obtaining a license, etc. One can continue on with as many such recitals as deemed appropriate. This is generally followed by a statement such as: Now, therefore, in consideration of the mutual covenants and promises hereinafter set forth, it is mutually agreed by and between the parties hereto as follows: Now we get to the main body of the agreement. These are the promises that the parties are making to each other. If these promises are not kept, then presumably there is a breech of contract. Under the law of contracts, there are remedies for the breech. The contact itself will provide some remedies -- the law of contracts will provide others. Definitions. Devote some time to the definitions. They make it easier to write the rest of the agreement in a form that's easier to understand. Generally, you'll want to identify the licensed patents, licensed products, territory covered, and such terms as Net Sales, Improvements, etc. Grant of License. Is the license to be exclusive or non-exclusive? May the Licensee grant sublicenses? What rights do you reserve solely to yourself? Make sure these are clearly stated. Payments. Are there to be minimum payments per period? How much (in dollars or units)? This is especially important for exclusive licenses. What is the royalty percentage, and what is it based on? This is usually Net Sales. Who will pay the patent expenses, if it's still pending, and the patent maintenance fees? Records and Reports. What reports will the Licensee provide to verify the base that your royalty is applied to? When? This is usually quarterly. What access do you have to Licensee's records for audit purposes, and what is the procedure? How long must the Licensee retain these reports after termination? Improvements. What happens in the event you make improvements in the invention? What happens in the event Licensee makes improvements in the invention? Infringement. Who's responsible for enforcing (i.e., prosecuting infringers of) the patent? Keep in mind there may occur situations in which it is in the Licensee's interest to let the patent fail. What happens if Licensee's product(s), based on your patent, infringes the patents of others? You should avoid taking on this responsibility. Patent Markings. If a patent number can be put on a product, it's good practice to require that it be done. Other Obligations of Licensee. Will Licensee promise to produce some quantity-level of product? Some dollar-level of sales? To use best efforts to commercialize? To maintain some quality level? Does Licensee indemnify you for product liability? If so, make sure that's clearly stated, and that it survives termination of the agreement. Disclaimer of Agency. Statement that the parties are independent contractors, i.e., the actions of one are not binding on the other. Insolvency of Licensee. What happens if the Licensee goes out of business? Becomes insolvent? Declares bankruptcy? Be sure to include provisions that automatically return the rights to you, and don't get tied up with Licensee's encumbered assets. Waivers and Modifications. Statement that occasional waiving of your rights (e.g., acceptance of late payments), does not alter your contract rights. Statement that the contract can be modified only in writing. No Warranties. Statement that you are providing no other warranties. Avoid warranting Licensee's freedom from infringement of patents of third parties. Try to avoid warranting that the patent(s) is valid. Try to avoid being deemed a "merchant" under the Uniform Commercial Code -- the UCC highly favors the buyer. Try to exclude any liabilities for consequential damages. Notices. What notices are required? Where and to whom are they to be sent? When do they become effective? Transfer of Interest. Can Licensee transfer its rights? You would typically prefer not. Term. How long is the license to last? Generally it's to expiration of the patent (or the last expiring patent), except as provided under Termination. Termination. This is an important section -- it's your way out if things don't work out as expected. Include any defaults not covered elsewhere. What is the form of notices of default? How long has Licensee to correct defaults? What happens to Licensee's products in process? Orders in process? Compliance with Law. What laws can be violated by Licensee? Import/Export regulations? Anti-trust? EPA? FDA? Make Licensee agrees to obey and conform to such laws and regulations. Entire Agreement. Statement that this is the entire agreement, and that you're making no other representations. Try to exclude any liability for (your) misrepresentation. Final Provisions. What law governs the agreement? Statement that the agreement is binding on heirs, successors, etc. Statement that headings are for convenience and not binding. Execution of Agreement. In witness whereof, the parties have caused this agreement to be executed by the duly authorized officers at the places and on the dates indicated below. Related Issues and Other Considerations The following topics frequently come up in patent license negotiations. They are best dealt with by separate agreements. Know-how and Technical Assistance. Licensee may wish certain services, or materials, from you in addition to the patent rights conveyed above. Trade Secrets. Licensee may wish certain trade secret rights in addition to, or in place of, the patents rights conveyed above. Options. Licensee may wish some time before executing the final agreement. This can be covered in an option agreement, attaching the license agreement. In return for some consideration, you give them an option, for a specified time, to acquire the license. Royalties. As a general rule of thumb, at least as a starting point, you can expect a royalty of about 5% of net sales. Be aware that this varies considerably across industries -- it's certainly not 5% in the auto industry. Recognize that you are trying to combine your rights and the Licensee's resources in a way that will benefit both of you. The Licensee is looking at profitability. It's trying to balance its risk against its potential gain. In negotiations, try to quantify this. The general feeling is that the Licensor should get about 25% of the pre-tax profitability and the Licensee about 75%. Above all, don't over price. This is the worst deterrent to successful licensing. Negotiations. The key to successful negotiation is thorough preparation. Know your own (reasonable) goals, and understand, as best you can, where the other party is coming from. During negotiations, remember that your objective is a win-win resolution. Be flexible. Control your impatience, your anger. Listen. Watch for communication gaps, and resolve them. And, above all, maintain a sense of humor. Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Why companies deal with outside inventors? Simply to increase their supply of new products. Companies need new products to survive. As old products become obsolete, new products must come on stream to replace the lost revenue. Companies need new products to grow. Every company wants to increase its market share, which requires a continuing stream of new and improved products. All companies engage in in-house product development. The smarter companies also look outside to augment their resources and give them a competitive edge over those who don't. Why companies resist dealing with outside inventors? Of a 1001 reasons, the first 999 are fear of lawsuits. Companies have much more to fear from outside inventors than inventors have to fear from companies. When a company deals with outside inventors, it exposes itself to frivolous lawsuits. These can be brought long after the event. Memories of what transpired have a way of changing over time. The company finds itself in a David and Goliath situation, where the biases favor the underdog David. If the case appears to have even superficial merit, there's always an attorney who will pursue it on spec. Companies dealing with outside inventors must protect themselves from such exposure. Other reasons include an NIH (not-invented-here) factor, and simply dealing with outside developers can be terribly time consuming. Many product developers don't do their homework before approaching the company. They send in proposals that don't fit the capabilities of the company--in development, in manufacturing, in marketing. Their understanding of the market is nebulous to poor, often requiring re-invention, redevelopment. They have unrealistic expectations of the value of their proposal. Just screening these proposals and corresponding with the submitters takes an inordinate amount of time. What an inventor should do before approaching a company:
What to expect when approaching a company. Most large companies really do play fair. If you're offering something of value, it's infinitely easier and less expensive to work with you than against you. The people representing these companies are professionals. They are trying to put together a sound business deal in which both sides win. You'll get much farther, faster by negotiating to that same end. A company will feel much more comfortable evaluating your proposal if you have a patent issued or pending. Not only does it clearly define the invention, but also it allows the company to deal with you with assurance that your rights are adequately protected. If you don't have a patent issued or pending, the company will want a written agreement either waiving any confidentiality between you or explicitly specifying the terms of confidentiality. If the latter, the company will insist that its obligations under the agreement ends if the information was previously known to the company, if it is available to the public or later becomes available through no fault of the company, or if the same information comes to the company through a third party, and in any event that its obligations end after a specified period of time. The company will also specify that its obligations will apply only to information that you have conveyed in writing, and it will want to hold and preserve those writings in its records. Companies do not want to see any details of what you are proposing until the respective confidentiality rights are clear. They will frequently assign a non-technical clerical to handle all initial dealings with outside inventors until such rights are cleared. Companies are interested in complete inventions, not in suggestions for ad campaigns, methods of doing business or vague ideas. Target your approach as best you can. Take the time to find out what division is most likely to be interested, and what group you should deal with; e.g., patent department, licensing group, new products group. If you can target an individual in the company; e.g., by knowing someone who can arrange an introduction, that's your best bet, as you come in with a bit more credibility. What to expect in a license agreement. Exclusivity. The company will want exclusive rights to the invention, either as an assignment or license. Royalty terms. If you're offering patent protection, you can expect royalties on the order of 1-5% of the company's sales of the product, depending on how much the company has to do to bring the product to market and how much it wants it. Keep in mind that a manufacturer's sales are typically half what the product ultimately commands on the shelf since most sell to wholesalers or distributors at such discounts. Up-front payments are rare. Companies typically want you to take the risks right along with them. If you're not offering patent protection, there's still possibility for royalties. However, they will be less and for shorter term. Patent work. Many companies are willing to take on clean up of patent work, especially the filing of foreign patents, in fact they'd prefer to. The perfection and enforceability of the patent is at least as important to them as you, and they're typically better equipped to do it. Diligence. The company will expect to provide you with some obligations for diligence on their part, e.g., that they will exercise reasonable effort and timeliness in bringing the product to market. Summary
Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page PATENT LICENSE AGREEMENT THIS AGREEMENT, effective this ___ day, of _________________ (month), _____ (year), is entered into by ____________________________________ (hereinafter "LICENSOR") and ________________________________________ (hereinafter "LICENSEE"). BACKGROUND WHEREAS, LICENSOR has designed and developed a ___________________________________ (hereinafter "INVENTION"). WHEREAS, LICENSOR is the owner of all right, title and interest in a United States Letter of Patent filed ______________ and issued _________ as United States Patent Number ______________. WHEREAS, LICENSOR desires to transfer to LICENSEE and LICENSEE desires to acquire from LICENSOR an exclusive license to manufacture and market the INVENTION covered by the patent rights in all other countries, territories and jurisdictions on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, parties agree as follow: SECTION 1. DEFINITIONS 1.1. GROSS SALES. "Gross Sales" shall mean the aggregate compensation the LICENSEE, or its subsidiaries, receives for goods sold under the Patent Rights without a reduction for taxes, transportation, returns, depreciation or other expenses. 1.2. CLOSING. "Closing" shall occur when both LICENSOR and LICENSEE have applied their respective signatures to this Agreement. 1.3. PATENT RIGHTS. "Patent Rights" means the following listed patents and/or patent applications, patents to be issued pursuant thereto, and all divisions, continuations, reissues, substitutes, and extensions thereof: Applications (a) U.S. Application Serial No. __________________ Date Filed: __________ SECTION 2. GRANT OF INVENTION AND PATENT RIGHTS In consideration for the up-front monies and royalty to be paid under Sections 3 and 4, LICENSOR grants to LICENSEE: (a) an exclusive, nontransferable license to manufacture and market the INVENTION in the United States; (b) an exclusive, nontransferable license to manufacture and market the INVENTION in all foreign countries; (c) all rights under the Patent Rights; and (d) all technology, trade secrets and know-how related to the design and manufacture of the INVENTION, including all design plans, blueprints and any documentation or software related thereto. SECTION 3. UP-FRONT MONIES LICENSEE shall pay to LICENSOR on the date of Closing $__________ in United States funds. The up-front monies are not to be considered part of the royalties due under Section 4 of this Agreement. SECTION 4. ROYALTY Upon Closing, LICENSEE shall pay LICENSOR a royalty payment based upon the Gross Sales of the LICENSEE. Said royalty payment shall be calculated based upon ___% of the Gross Sales of the LICENSEE with regard to the Invention. SECTION 5. TIMING OF ROYALTY PAYMENTS AND MINIMUM ROYALTY 5.1. QUARTERLY PAYMENTS. LICENSEE shall pay LICENSOR a royalty for each quarter of each year during which this Agreement is in effect. LICENSEE shall pay LICENSOR quarterly, four times per year, on or before the 30th day after January 1, April 1, July 1, and October 1 of each year during which this Agreement is in effect. 5.2. MINIMUM PAYMENT. A minimum quarterly royalty payment of $______ shall be paid each quarter. SECTION 6. REPORTS AND RECORDS 6.1. FINANCIAL STATEMENT. LICENSEE shall provide a quarterly financial statement to LICENSOR showing the number of units manufactured during each quarter when each quarterly royalty payment is made. 6.2. RECORDS. LICENSEE shall keep records of the Gross Sales and number of units manufactured and sold pursuant to this Agreement in sufficient detail to enable the royalty payment to LICENSOR to be determined. 6.3. ANNUAL INSPECTION. LICENSEE shall allow LICENSOR's representative, one annual inspection, during regular business hours or at such other times as may be mutually agreeable, to inspect LICENSEE's books and records to the extent reasonably necessary to determine LICENSEE's compliance with the terms of this Agreement. 6.4. PENALTY. If the LICENSOR determines through an annual inspection that the LICENSOR was undercompensated as required by this Agreement, then the LICENSEE shall pay to the LICENSOR a Penalty Fee. The Penalty Fee shall comprise three times the difference between the actual compensation and the required compensation. The LICENSEE shall still be obligated to pay full compensation as required under the Agreement. SECTION 7. OBLIGATIONS OF LICENSOR The LICENSOR agrees with the LICENSEE to execute such documents and give such assistance as the LICENSEE may reasonably require: (a) to defeat any challenge to the validity of, and resolve any questions concerning the Patent Rights; (b) to apply for and obtain patents or similar protection for the INVENTION in other parts of the world at the LICENSEE's expense; (c) to do all that is necessary to vest such protection in the LICENSEE; (d) to inform the LICENSEE of all technical information concerning the INVENTION; and (e) to supply the LICENSEE with any documents or drawings relevant to the INVENTION. SECTION 8. REPRESENTATIONS AND WARRANTIES OF LICENSOR 8.1. LICENSOR represents and warrants to LICENSEE as follows: (a) LICENSOR is the sole and exclusive owner of the INVENTION and the Patent Rights. No other parties have any right or interest in or to the INVENTION nor to the Patent Rights; (b) All rights to the INVENTION and the Patent Rights are free and clear of all liens, claims, security interests and other encumbrances of any kind or nature; (c) The LICENSOR has not granted any licenses to use the INVENTION to any other parties; (d) LICENSOR has the right and power to enter into this Agreement, and has made no prior transfer, sale or assignment of any part of the INVENTION, patent rights pertaining to the INVENTION or the Patent Rights; (e) As of the date hereof and as of the Closing date, LICENSOR is not aware of any parties infringing on the patent rights transferred hereunder; (f) LICENSOR is not aware that the INVENTION infringes upon any patent, but LICENSOR does not otherwise warrant or guarantee the validity of the Patent Rights or that the INVENTION does not infringe any valid and subsisting patent or other rights not held by the LICENSOR; and (g) The INVENTION was not procured by the use of confidential information, trade secrets, or in other respects in violation of law, and there is no action, order or proceeding, to the LICENSOR's knowledge, alleging any of the foregoing. 8.2. Each of the warranties and representations set forth above shall be true on and as of the date of Closing, as though such warranty and representation was made as of such time. All warranties and representations shall survive closing. SECTION 9. LICENSEE'S OBLIGATIONS 9.1. INDEMNIFICATION. The LICENSEE agrees to indemnify the LICENSOR and his heirs successors, assigns and legal representatives for liability incurred to persons who are injured as a consequence of the use of any INVENTION manufactured by the LICENSEE or as a consequence of any defects in the INVENTION. 9.2. QUARTERLY ROYALTY. The LICENSEE agrees to pay the above stated quarterly royalty without demand. 9.3. REASONABLE EFFORTS. The LICENSEE agrees to utilize all reasonable efforts to manufacture and market the INVENTION. 9.4. FINANCIAL STATEMENT. The LICENSEE agrees to provide the financial statement at the end of each quarter without demand. 9.5. PROFESSIONALISM. The LICENSEE agrees to the extent reasonably possible, have all manufacturing, shipping, and sales performed in a professional and equitable manner. 9.6. LIABILITY INSURANCE. The LICENSEE agrees to maintain liability insurance to cover the INVENTION in an amount greater than or equal to $1,000,000. 9.7. TRADE SECRETS. The LICENSEE agrees to take all reasonable steps to maintain the confidentiality of all trade secrets provided by the LICENSOR to the LICENSEE during and after this Agreement. SECTION 10. CONDITIONS TO CLOSING LICENSEE's obligation to pay the up-front monies and the royalty shall be subject to the satisfaction on or before the Closing of the following conditions, any one or more which may be waived by LICENSEE: (a) The warranties and representations made by the LICENSOR in this Agreement shall be true and correct in all material respects on the Closing date as if such warranties and representations had been given as of the Closing date. (b) LICENSOR shall have delivered to LICENSEE such instruments of transfer as may be reasonably requested by LICENSEE to consummate the transactions contemplated hereby. SECTION 11. MARKING OF INVENTION LICENSEE agrees to affix patent pending and patent notices to all INVENTIONs prior to their sale in accordance with 35 U.S.C. ยง282. Each device shall have either the words "PATENT PENDING" or "Patent No." followed by the patent number conspicuously marked on each of the goods sold under the Patent Rights subject to the reasonable approval of the LICENSOR. SECTION 12. DURATION AND TERMINATION 12.1. This Agreement shall remain in full force and effect unless and until termination or cancellation as hereinafter provided. 12.2. If LICENSEE shall at any time default in rendering any of the statements required hereunder, and payment of any monies due hereunder, or in fulfilling any of the other material obligations hereof, and such default is not cured within fifteen days after written notice is given by the LICENSOR to LICENSEE, LICENSOR shall have the right to terminate this Agreement by giving written notice of termination to LICENSEE. LICENSEE shall have the right to cure any such default up to, but not after the written notice of termination. 12.3.LICENSOR shall have the right to terminate this Agreement by giving written notice of termination to LICENSEE in the event of any of the following: (a) liquidation of LICENSEE; (b) insolvency or bankruptcy of LICENSEE, whether voluntary or involuntary; or (c) appointment of a Trustee or Receiver for LICENSEE. 12.4.LICENSOR shall have the right to terminate this Agreement, by giving three months written notice, if after the second year of this agreement the previous years total royalty payment is lower than $________. 12.5.LICENSEE shall have the right to terminate this Agreement, by giving three months notice, if all patent applications, continuation, continuation-in-part or divisional applications, related to the INVENTION become abandoned without issuing into a patent. 12.6.LICENSEE shall have the right to terminate this Agreement, by giving three months notice, if a court of law determines all of the issued patents to be invalid. SECTION 13. MAINTENANCE FEES AND INFRINGEMENT COSTS 13.1. MAINTENANCE FEES. LICENSEE shall be responsible for paying all maintenance fees for the Patent Rights until they expire. 13.2. DEFENDING AN INFRINGEMENT LAWSUIT. LICENSEE shall be responsible for all expenses, including but not limited to legal fees, associated with defending an infringement action involving the INVENTION. LICENSEE also agrees to vigorously defend at its own expense any invalidity actions brought against the Patent Rights. 13.3. BRINGING AN INFRINGEMENT LAWSUIT. LICENSEE shall also be responsible for all expenses, including but not limited to legal fees, associated with bringing an infringement action involving the Patent Rights. LICENSEE agrees to initiate and vigorously prosecute proceedings to the termination of any infringements on the Patent Rights. 13.4. NOTIFICATION. LICENSEE and LICENSOR both agree to notify each other of any legal action involving the Patent Rights or the INVENTION. SECTION 14. BINDING ARBITRATION Any controversy or claim arising out of or relating to this contract, or the breach thereof, between the LICENSOR and the LICENSEE shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association in a convenient location in ___________ (State). The judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. SECTION 15. GOVERNING LAW This Agreement shall be governed in accordance with the substantive laws of the State of __________ of the United States of America. SECTION 16. SEVERABILITY 16.1. The parties agree that if any part, term, or provision of this Agreement shall be found illegal or in conflict with any valid controlling law, the validity of the remaining provisions shall not be affected thereby. 16.2. In the event the legality of any provision of this Agreement is brought into question because of a decision by a court of competent jurisdiction, LICENSOR, by written notice to LICENSEE, may revise the provision in question or delete it entirely so as to comply with the decision of said court. SECTION 17. NOTICES UNDER THE AGREEMENT For the purposes of all written communications and notices between the parties, their addresses shall be: LICENSOR: Attn:__________________________________ __________________________________ __________________________________
LICENSEE: Attn: __________________________________ __________________________________ __________________________________ __________________________________ SECTION 18. NONASSIGNABILITY The parties agree this Agreement imposes personal obligations on LICENSEE. LICENSEE shall not assign any rights under this Agreement without the written consent of LICENSOR. LICENSOR may assign all rights hereunder. SECTION 19. ENTIRE AGREEMENT This Agreement sets forth all of the covenants, promises, agreements, conditions and understandings between the parties and there are no covenants, promises, agreements or conditions, either oral or written, between them other than herein set forth. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon either party unless reduced in writing and signed by them. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers on the respective dates hereinafter set forth. LICENSOR: By: _________________________ Date: ________________
LICENSEE: By: _________________________ Date: ________________ Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Royalties and Other Odd Animals Licensing Issues When preparing a royalty licensing agreement certain issues tend to be more important than others. Each situation dictates its own set of circumstances and parties bring differing viewpoints to the table. However, usually, the most important issues are:
If these three issues can be settled early on in the negotiation, it is highly probable that the agreement will be completed without a problem. Therefore, the first order of business should be to settle these three issues. Royalty Rate The royalty rate that a licensee can afford to pay is strongly dependent on gross margin. Therefore, the licensor should try to identify the most likely gross margin at an early point in discussions. Royalty rates vary between about one percent and 15% of net sales, with an average of about 5%. Licensee Fee The licensing fee is a payment from licensee to licensor at the time the royalty license agreement is signed and is a showing of good will on the part of the licensee. Most royalty license agreements provide a back door for the licensee to escape the agreement after an initial market evaluation has been completed and sales do not meet expectation. This is fair to both parties since neither wishes to see the project fail. But the licensor should not be penalized for the licensee's inabilities. Therefore, the licensing fee should compensate the licensor for time lost while the licensee determines if he can do what he thinks he can do. If the licensee pulls out of the deal prematurely, the licensing fee should be non-refundable. Licensing fees tend to range from 25-100% of the projected first year's royalties depending upon how soon revenues are expected to be forthcoming. Performance Guarantee To motivate the licensee to move quickly and effectively into the market with the licensed product a performance guarantee is necessary. Such a guarantee should be at least 50% of the licensee's estimated annual sales projection, which, it is assumed, is low-balled in the first place. If the licensee cannot do 50% of estimated sales, than he has made a major miscalculation in his abilities or in the market, a bad sign. In this case, the licensor should have the right to cancel the agreement, or renegotiate its terms. Other Issues There are many other contract issues that have an important effect on how fair, legal, controllable, beneficial and profitable a royalty agreement is to the licensor as well as the licensee. Some of these include stipulations concerning sublicensing, design changes, failure of patent issue, follow-on patents, associated trademarks and other intellectual properties, international rights and many others. Since negotiating strength comes through a thorough understanding of what is fair, what is traditional, what is legal, etc., one should always use an experienced intellectual property negotiator when preparing and negotiating a royalty license agreement. Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page Licensor Performance Obligations One of the first things to consider is how much technical assistance is the licensor going to provide to the licensee during the course of the contract. In particular, is the technical assistance going to be in addition to the royalties under the contract, by way of consulting fees, or will it be included as part of the royalty payments? Who pays the costs for travel and attendance of Mr. Inventor at Mr. Manufacturer's premises? Is the licensor needed to attend trade shows and the like? Is there a minimum amount of consulting that is required from Mr. Inventor, or a specific ongoing function? Licensee Performance Obligations The licensor typically wants the licensee to assume certain responsibilities to help promote the product. Many of these responsibilities will directly benefit the licensee in any event, but in some agreements it is beneficial to spell these out in detail. Some of the responsibilities might include the following:
Return to Table of Contents for this guide | Return to index of all guides | Return to the top of this page (including digital licensing) Acceptance The formal act of agreeing to an offer to enter into a legally binding agreement. Access The ability to gain entry to a database or other digital information. Agreement An understanding between two or more parties that is often embodied in a legally binding, written contract. Amendment An addition to the terms of an agreement. See also Modification. Archive Copy A copy of a work intended to be preserved permanently. Assignment A transfer of all or part of the contractual rights and/or obligations to another party. Authentication A process by which the identity of a user accessing a network or other source of information is verified. Authorized Signature The signature by a person with authority and power to represent and legally bind a party to a written agreement. Authorized Use; Permitted Use Use of information that is expressly allowed under a Licensing Agreement. Authorized User; Permitted User A person designated in a Licensing Agreement as having permission to access or otherwise use the digital information that is the subject matter of the agreement. Backup Copy A temporary copy of digital information made for recovery purposes. Breach A breaking of a promise or a failure to perform an obligation under an agreement. "Click-on" or "Click-through" License See Shrinkwrap Agreement. Concurrent Use The simultaneous use of digital information by more than one user; often used as a measure of limitations on the use of digital information. Confidentiality The treating of information as private and not for distribution beyond specifically identified individuals or organizations, nor used other than for specifically identified purposes. Contract A formal, legally binding agreement between two or more parties. Copies Reproductions of all or a portion of digital information onto any one of a number of media, including computer diskette, hard-copy printout, or by exact quotation. Copyright Legally granted property rights in intellectual works embodied in a some physical means of expression, such as print, musical score or electronic image. Coursepacks Copies of materials assembled by instructors to be used by students in a class, usually in lieu of or in addition to a textbook. Dial-up Access Access to digital materials through connection with a remote Server through a modem or other remote access device. Disclaimer A statement denying responsibility for a particular action. Display Information that appears on the screen of a computer terminal. Distributor An individual or organization that re-sells, sublicenses or otherwise makes digital information available from the owner to end-users. Domain A group of computers linked to the Internet whose host names share a common suffix, such as ".com" (commercial), ".edu" (educational), or ".net" (communications network). Download To copy digital information onto a hard drive, diskette or other electronic storage media. End-user An individual or organization that accesses digital information for their own use. Fair Use The right set forth in Section 107 of the United States Copyright Act, to use copyrighted materials for certain purposes, such as criticism, comment, news reporting, teaching, scholarship, and research. Section 107 sets out four factors to be considered in determining whether or not a particular use is fair: (1) the purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. Force = majeure Literally, "greater force"; a clause designed to protect against failures to perform contractual obligations caused by unavoidable events beyond the party's control, such as natural disasters or wars. Governing Law The jurisdiction whose law will be applied in the event of a dispute relating to an agreement. Host Name A unique name used to identify a computer on a network. Indemnity One party's agreement to insure or otherwise defend another party against any claims by third parties resulting from performance under the agreement. Infringement An unauthorized use of material protected by copyright, patent or trademark law. Interlibrary Lending ("ILL") Loaning materials owned or licensed by one library to another library or its users. Internet A worldwide system of interconnected networks and computers. Internet Protocol ("IP") A standard developed to identify computers and networks linked to the Internet. IP Address A unique identifier of computers and/or networks linked to the Internet. Liability Legal responsibility for an act or failure to act. License Permission to do something which, without such permission, would be illegal. For example, a license to use digital information gives the Licensee permission to access and use the information under the terms and conditions described in the agreement between the Licensor and the Licensee. Licensee The person or entity that is given permission through a License to access or otherwise use digital information. The Licensee, often a library, educational or research organization, generally pays the Licensor a fee for permission |