Key Takeaways

  • Licensing infringement involves unauthorized use of copyrighted, patented, or trademarked works.
  • Breaches of license agreements can give rise to claims for damages or injunctions.
  • Licensing agents may or may not have standing to sue for infringement depending on the rights granted.
  • Several defenses, including fair use and implied licenses, may shield alleged infringers.
  • Remedies for infringement range from monetary damages to criminal penalties.

Licensing infringement is the act of using another person's protected intellectual property (IP) without permission. Copyright infringement is tried in federal court and governed by the U.S. Legal Code, Title 17.

What Is a Copyright?

Obtaining copyright protection gives the copyright owner the exclusive right to display, adapt, perform, reproduce, distribute, or otherwise use an original work. Creations that can be copyrighted include but are not limited to photos, artwork, software, articles, books, and songs.

Typically, the creator of a copyrighted work owns the copyright, but he or she can license or assign the rights to another company or individual. If the author uses his or her own work after assigning the copyright to a publisher or anyone else, he or she can subsequently be sued for infringement.

Copyright License Agreement

When a party wants to use copyrighted material, he or she must negotiate for a license agreement with the owner of the copyright. These agreements typically limit the type of use allowed; for example, distribution or adaptation may not be covered under the agreement.

Non-commercial works are often licensed for a flat fee, while commercial works typically command a percentage of the licensee's revenue for selling the work in question.

A free copyright license does not constitute a contract. That's because nothing of value is being given in exchange for the license. However, any use outside the license constitutes infringement.

Breach of Licensing Agreement

The breach of a licensing agreement is sometimes, but not always, considered copyright infringement. If the licensee fails to pay royalties as agreed, the copyright owner can void the licensing agreement and sue for damages. If the material is used after the licensee has been notified of the contract cancellation, this constitutes infringement.

Using the work in an unauthorized manner, such as adapting it into another language, is also considered infringement.

Licensees can rarely sue for patent infringement by third-parties, even when they hold an exclusive license. The exception is when the patent owner cooperates with the licensee or when the license grants all substantial rights. Patent holders can be sued for infringement for actions that were exclusively granted to licensees.

Who Can Enforce Licensing Infringement?

A key issue in licensing infringement cases is determining who has standing to sue. Generally, only the legal or beneficial owner of the intellectual property has the right to bring an infringement claim. However, an exclusive licensee may also sue if:

  • The license transfers all substantial rights to the licensee.
  • The licensee is explicitly granted the right to enforce the IP.
  • The original owner joins the lawsuit as a co-plaintiff or provides written consent.

Non-exclusive licensees typically cannot enforce IP rights in court. Moreover, licensing agents may not sue for infringement unless the license explicitly grants them standing or enforcement rights​.

Enforcing Licensing Agreements

When a licensing agreement is breached, the licensor has several enforcement options depending on the type of intellectual property involved and the specific terms of the contract. Common steps to enforce a license include:

  • Sending a cease-and-desist letter to demand the licensee halt the infringing activity.
  • Filing a lawsuit for breach of contract, infringement, or both.
  • Seeking injunctive relief to immediately stop unauthorized use.
  • Requesting damages, including lost profits, statutory damages, or restitution.
  • Terminating the license agreement where allowed and pursuing continued legal action if infringement persists.

Enforcement strategies may vary for copyrights, patents, and trademarks. For instance, trademark owners can often pursue claims under the Lanham Act, which allows for recovery of profits and even treble damages in some cases​.

Penalties for Infringement

Copyright infringement carries monetary damages calculated based on the number of instances and the estimated lost profits as a result. The court may also order restitution for court costs and damaged reputation. Statutory damages can range from $200 to $150,000, though penalties higher than $30,000 are typically limited to cases of willful infringement. Copyright holders can also seek an injunction, which stops the infringing party from using the work in question.

Copyright infringement can also result in criminal penalties, including up to five years in prison according to the U.S. Department of Justice. Repeat offenders could be sentenced to 10 years in prison. The typical offense includes damages, legal fees, and up to one year in prison.

Copyright cases are considered criminal when:

  • The infringement was intentional for financial gain.
  • The value of the infringement exceeded $1,000.
  • A movie, album, or other commercial work was shared over the internet before its release.

Statutory damages for registered works with the U.S. Copyright Office can be up to $150,000 per act, without consideration of actual monetary damages. A registered copyright owner can elect statutory damages instead of actual damages.

Trademark and trade secret cases for breach of contract can carry exemplary damages beyond actual damages. Treble damages can be awarded in trademark and patent cases.

The Patent Act and Lanham Act allow attorney fees to be recovered, which is more common when a breach of contract action is successful.

Common Defenses Against Licensing Infringement Claims

Several defenses may protect an accused infringer, including:

  • Fair Use: Allows limited use of copyrighted material without permission for purposes such as commentary, criticism, news reporting, teaching, or research.
  • Implied License: If the IP owner’s conduct suggests they permitted use, an implied license may be inferred.
  • Invalidity of the IP: Defendants can challenge the validity of a patent, trademark, or copyright.
  • Lack of Substantial Similarity: For copyright claims, the defendant may argue their work is not substantially similar to the protected work.
  • De Minimis Use: The infringing act was so minor that it does not constitute a legal violation​.

These defenses, if successful, may eliminate or reduce liability for alleged licensing infringement.

Duckweed USA Example

A company called Duckweed USA licensed a patent for a renewable, clean, and affordable substitute for petroleum made from vegetable oil, wastewater, or algae. They used the technology covered by the patent to develop manufacturing facilities.

The patent's creator, Rudolph Behrens, attempted to lure investors to back his company, BEAR Oceanics, instead of funding Duckweed. Duckweed subsequently sued for patent infringement. Behrens countersued on the grounds that he couldn't infringe upon his own patent.

The court found that the licensing agreement actually gave Duckweed the right to sue for patent infringement.

Frequently Asked Questions

  1. What is licensing infringement?
    Licensing infringement occurs when someone uses copyrighted, patented, or trademarked material beyond or outside the scope of a license agreement.
  2. Can a licensee sue someone else for infringement?
    An exclusive licensee may sue if they hold sufficient rights under the license. Non-exclusive licensees generally cannot sue unless the agreement permits it.
  3. What is the difference between a breach of license and infringement?
    A breach of license is a contractual issue, while infringement is a violation of IP law. Breach may become infringement if unauthorized use continues after the license is terminated.
  4. Can a licensing agent enforce IP rights?
    Only if the licensing agreement explicitly grants the agent enforcement rights or standing in legal disputes.
  5. What penalties can be imposed for licensing infringement?
    Penalties range from actual and statutory damages to criminal fines and imprisonment in cases of willful or large-scale infringement.

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