Copyright law can be confusing, both for a licensor, someone granting rights (for intellectual property or certain licensed products), or a licensee who wants to make use of another’s intellectual property rights (for specific purposes and a certain period).

Whether you are licensing rights or would want to license rights, make sure you are familiar with what is allowed and prohibited under copyright laws. As it is a legal agreement, it has to be pursuant to relevant statutes. People can sue you 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 its actual owner (not misleading third parties). A license agreement with a third party could be invalid, and this actually happens from time to time. The licensed rights must be from the actual owner, and royalties must be paid to such pursuant to the copyright act.

  1. Clearly describe the rights being licensed

Licensors, for example, may grant a license contract specific to a song but not the album where it came from. 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. Since signing the contract indicates that both licensor and licensee agree to the terms and conditions, it must be followed up to the smallest detail.

  1. Define the license scope

Licensing AgreementLimitations: In the case of intellectual property rights, the license could allow the use of such rights only in certain products manufactured or sold by a licensee. Having the right and license to use a trademark, for example, maybe limited to caps and shall not be used on shirts or other clothing.

Territory: An individual may use license agreements only within specific geographic limits. This means that a licensee shall not make use of it in another state or country, depending on what is agreed upon. Licensees often negotiate such with the other party. Licensors, meanwhile, must ensure that this is clearly indicated in the license contract.

Time: A license agreement for a certain right is often only for a set period of time, and is very rarely perpetual in nature. Depending on the licensing arrangement, a licensee may opt to renew it. Licensors must therefore specify expiration and renewal terms of the agreement in the document.

Revocable or irrevocable clauses: A license grant may be revoked. If so, licensors must define violations or events where he or she will impose such revocation or termination of the licensing contract. Signing the contract means a licensee agrees to comply with the terms.

  1. Licensing fee or royalty

Negotiation is almost always necessary for this subject matter. A licensor may be entitled to an initial payment plus fixed annual or monthly payments or other obligations in connection with those set-forth in the agreement. Licenses can also be acquired through an initial fee, plus regular payments based on net sales, for example. A licensor would often opt for sales-based payments than an accompanying flat fee. However, such a variable license fee could be a limitation if sales are high.

  1. Updates

In the case of software license agreements, for example, there may be new versions or bugs may have been fixed. A licensee should check if the applicable license covers the right to get all relevant updates. A licensor, meanwhile, may include updates for licensed software to improve its merchantability. Software license agreements also vary depending on the nature of the software product.

  1. Indemnification

Particularly to each case, licensing terms should be pursuant to copyright and intellectual property laws. This is often associated but is not limited to, indemnification. Such should be included to protect both parties from (and make the other party liable for) any wrongdoing. This additional legal protection would indemnify a licensee from infringement claims (through third parties asserting intellectual property rights) or a licensor from any misuse or unauthorized use of the licensee such as copying, reproduction, or any other activity governed by intellectual property law.

These are just a few of what you need to know about a licensing agreement. When drafting or accepting an agreement, know the difference between a non-exclusive or exclusive license and what ‘expressly’ or ‘implied’ shall mean in the context of the document. Before you create, distribute, terminate, or sign any licensing agreement, make sure you have a trusted IP lawyer. Contact us at War IP Law for assistance on patents, trademarks, and other intellectual property concerns.