Licensing and IP assembly Flashcards
What is a license agreement?
In contractual terms, a license agreement (e.g., a patent license) is * an Agreement by one party (the IP rights owner – the Licensor)
* to refrain from suing for infringement of an IP right to another party (the Licensee)
* in exchange for something of value (the consideration) (e.g., cash, royalties) from the licensee.
self-license
the owner of the IPR keeps the rights
sole license
seller keeps rights as well
sub-license
the licensee itself is allowed to grant licenses (to the licensed technology) to third parties
grant-back license
(also sometimes referred to as “technology flowback”)
gives the licensor the right to use (any) possible future technological improvements that the licensee makes to the originally licensed technology, usually in combination with a compensation of some sort
block/packet license
rights to several technologies as a package
blanket license
In a blanket license, a licensor licenses out all rights related to the (currently unknown) future developments in a certain area. Thus, if future developments that fulfill certain criteria lead to new patents and know-how, the rights to use these are automatically granted within the blanket license agreement—in contrast to “off the shelf” licensing of existing technologies and licensing on order (or not) of future new technolo- gies.
cross-license
In this agreement, the parties go into a mutual agreement granting each other (a package or bundle of) licenses. Essentially, the firms license each other with the compensation being a license, or a package of licenses (or lower price).
What are some common choices to make when it comes to licenses?
Type (e.g. exclusive vs. non-exclusive)
Term (how long the license will last)
Scope (territoriality, field of use)
Fees/royalties
Improvements/enhancements
Litigation/enforcement
Technology/assistance
Cross-license
Change of control
grant-forward
The licensor may “grant forward” any new intellectual property that it obtains related to the IP being licensed
What are typical options when it comes to the terms of a license?
Term – how long the license will last
Typical options:
* until the IP right terminates,
* until some condition occurs, and/or
* a fixed time period (telecom licenses are typically 5 years with a renewability clause).
What options are there when it comes to fees/royalties?
The fees paid by the licensee to the licensor can vary almost infinitely
* Fully paid up by a one-time fee
* Downpayment
* Royalty payment based on the licensee’s use of the licensed IP right
- Based on licensee’s sales and/or
- Based on licensee’s profits
- Possibility of minimum annual payment
The royalty rate may also be defined such that the Licensee will have a different royalty rate (typically lower) as Licensee’s sales or profits increase
Who controls enforcement of the licensed IP?
- A non-exclusive licensee typically has no rights to enforce intellectual property against third parties.
- An exclusive licensee may have a right to enforced licensed IP against third parties.
- The licensee agreement may also define who controls the litigation, who pays for the litigation/enforcement, and who receives any rewards from the litigation/enforcement.
technology license
A technology license clause sets out the terms and conditions under which the licensor assists the licensee with the licensed technology.
What are options when it comes to technology/assistance?
IP licenses may define assistance that the licensor provides to the licensee.
* A patent license is simply an agreement by the licensor to the licensee not to sue for patent infringement.
✓The licensor has no obligation to help the licensee use the patented technology.
* A technology license clause sets out the terms and conditions under which the licensor assists the licensee with the licensed technology.
* It is possible to license technology without also licensing intellectual property rights.
✓A patent license that includes a technology license is typically more valuable than just a patent license alone.
* The desirability of a technology license depends heavily on the licensee’s situation.
✓Some firms license patents & technology because they need help developing a particular technical area.
✓Other firms license patents simply to avoid litigation
Why might it be important to stipulate that the license and/or its terms may change if the ownership for one of the parties changes?
Many licensors do not want to license their IP to head-to-head competitors
What is background knowledge/IP?
Existing knowledge put into the collabora- tion
What is foreground knowledge/IP?
Knowledge created as an outcome of the collaboration
What is sideground knowledge/IP?
Knowledge relevant to the collaboration developed in-house in parallel to the collaboration
What is postground knowledge/IP?
Knowledge relevant to the collaboration developed in-house by the firm after the collaboration (formally) finished
What are some common clauses in licensing agreements?
An Assign-Back Clause stipulates that the licensee must transfer ownership of any improvements it makes to the licensed technology back to the licensor (similar to Grant-Back Clause)
A No-Challenge Clause stipulates that the licensee is not allowed to challenge the validity of the licensed patents (unenforceable due to public policy in some jurisdictions)
A Termination Clause stipulates that the licensor and/or licensee has the right to terminate the license agreement under certain conditions, e.g., failure to timely pay royalties.
What are factors influencing the value for the buyer (e.g., the ceiling price)?
- Strategic value
- Level of protection of the licensed object
- Risk premium
- Scope of IP rights (license character, some terms of which
have been discussed above) - Potential markets (regions, applications, segments)
- Competitive position
- Cost and time for R&D, production, marketing, etc., in
exploiting the license - Potential margins and revenues in exploiting the license
- Potential learning efforts
- Impact on other license deals
- Opportunity costs
What are factors influencing cost for the seller (e.g., the floor price)?
- R&D, engineering and production cost
- IPR cost
- Marketing cost
- Overhead
- Risk premium
- Costs related to license restrictions
- Feedback benefits (grantback licenses, etc.)
- Potential learning efforts
- Strategic costs/benefits
- Impact on other license deals
- Opportunity costs
If the parties are able to reach a price for a license, then the price will have been determined by the Buyer’s and Seller’s respective:
- Uncertainty tolerance
- Regulations
- Strategy and tactics
- Finance, payment form
- Bargaining power
- Negotiator biases
