Intellectual property law and licensing can be confusing, both for a licensor, someone granting rights, or a licensee, who wants to make use of another’s intellectual property rights.

Whichever side you are on, make sure you are familiar with what is allowed and prohibited under intellectual property laws. A license is a legal agreement, so it must be compliant with relevant statutes. You can be sued for problems arising from invalid license agreements, and that’s the last thing you would want.

  1. Know your licensor

Licensees must exercise diligence and make sure that they are licensing rights from the actual rights owner (not deceptive third parties). It sounds obvious, but this actually happens from time to time. A license agreement with such a third party would be invalid.

  1. Clearly describe the rights being licensed

A licensor who agrees to grant a licensee may impose his or her specific license terms, and these must be clearly described in the document. The scope of the rights is critical, and must be described to the smallest detail. For example, a licensor may grant a copyright license specific to a song, but not the album where it is featured. A trademark license may be limited to only one specific product, even if the mark is registered for many products.

  1. Define the license scope

Licensing AgreementIn addition to the scope of the rights being licensed, there are several other provisions that define and limit the scope of a license agreement.

Territory: An individual may use licensed intellectual property only within the geographic limits as set out in the agreement. For example, if an agreement is limited to only Florida, the licensee has no right to use the intellectual property in Texas or Canada.

Time: License agreements are often only for a finite period of time. They are rarely perpetual. Depending on the terms, a licensee may opt to renew the agreement. It is important for the parties to set forth terms about when and how the agreement expires, terminates, or renews.

Revocable or irrevocable clauses: Generally, a license grant may be revoked. Licensors should define the violations or events for which revocation or termination will result.

  1. Licensing fee or royalty

Negotiation is almost always necessary when it comes to fees and royalties. One common arrangement is that the licensee will pay the licensor a fixed, initial payment plus fixed annual or monthly payments throughout the term of the agreement. Under another common arrangement, the licensee still pays an initial fee, but the regular payments are variable based on sales.

  1. Updates

Software is often the subject of a license agreement. Many software companies regularly release updates that may contain new versions or bugs fixes. A licensee should check to see if the license includes the right to get all relevant updates. A licensor, meanwhile, may also want to include updates to improve its software’s merchantability. Software license agreements also vary depending on the nature of the software product.

  1. Indemnification

Indemnification should be included to protect each party from liability for any wrongdoing on the part of the other party. For example, license agreements often include an indemnification clause that protects a licensee from infringement claims brought by third parties asserting intellectual property rights against the licensor.

These are just a few things you need to know about a licensing agreement. Before you enter into any licensing agreement, make sure you have a trusted intellectual property lawyer. Contact us at War IP Law for assistance on patents, trademarks, and other intellectual property concerns.