Patent License Agreement Checklist: Everything You Need to Know
A patent license agreement checklist can be a very helpful tool when obtaining license agreements for a patent. 7 min read
Patent License Agreement Checklist
A patent license agreement checklist can be a very helpful tool when obtaining license agreements for a patent. A detailed checklist can help in preparing and writing the agreement. Although it sounds like an easy step that you could skip, it is crucial in ensuring all aspects of the agreement are covered.
Many negotiators and attorneys are well versed when dealing with licensing agreements, particularly with writing more than one agreement at any given moment. Without their professional competence and conditioning to working on many projects at a time, attorneys would have trouble remaining productive.
However, a detailed checklist can be a lifesaver for a working licensing officer to ensure that no critical details are left out of such an important document.
License Agreements for Patent
License agreement is a law in each state that is governed by a contract. It can also be governed by the federal government in cases that include federal matters, such as patents, trademarks, and copyrights. License agreements are like a contract because it looks to the future and includes trust between two or more parties. An Executory contract includes an exchange of money or other valuation in order to satisfy all parties.
The licensor is the one who owns the intellectual property. A licensee uses the intellectual property, much like a renter who uses the property within certain parameters in a contract. Due diligence refers how you research and investigate a licensee. You will need to research how they worked with other licensors and whether or not they have been involved in license agreement litigation in the past. If so, determine the cause of the litigation and make a final determination based on those results.
One thing to remember is that a licensee can also be a competitor, but the goal is a partnership. Negotiation refers to dealing with any reason one or more in a party would want to change any aspect of a contract. You can use it to enforce or alter preset limits that you are willing to accept or reject regarding the terms of an agreement.
When writing a license agreement, you must ensure that it is specifically relevant to those involved in negotiating the terms. The term definitions section of the agreement is crucial. It must be very clear and make sense even years into the future so that it can be easily interpreted.
In good faith, the agreement can include guaranteed royalties, which are those that need to be paid within a specified amount of time. It can also include a specific amount of money on marketing or research and development. This will demonstrate you effort to produce and sell your product per the terms in the agreement, particularly within an exclusive agreement.
The granting of a license is exclusive and provided to certain markets and territories in various countries. You will need to include those who are to be responsible for any product improvements, as well as who is charged with paying for product improvements.
Other terms that should be included in a license agreement include training and cooperation. You must also make all clauses and terms clear. Also, make sure you include what is and is not allowed within the agreement and under which conditions those allowances are permitted. You must also be sure to cover the march in rights.
A license agreement should have a licensor reservation, such as own or use. He or she will also disclose trade secrets and business plans, as well as other pieces of sensitive information to the licensee. The protections of this information must be included in the license agreement.
Also required in a license agreement:
- Responsible parties with regard to corporate compliance, adherence to laws, international issues, and other regulations
- Termination and renewal terms in order to protect licensor from a poorly performing licensee
- Sales clauses, corporate mergers, and acquisitions terms so that competition does not have the opportunity to purchasing the licensee for their own use
- Disclosure of the life of the intellectual property. This set the life of the license. Patents last for 20 years. Copyrights can last up to 120 years, and trademarks have no expiration date.
- Royalty terms. Failure to pay royalties can result in penalties and possibly termination of the agreement.
- Limits of the licensee. This limits the ability to produce and market products from competitive sources
- Clause for bankruptcy in the event the licensee or licensor enters bankruptcy proceedings
- Clauses pertaining to royalties and how they are paid, stocks, changes in longevity, and intellectual property strength
- Clause that pertains to exclusivity, volume and longevity changes, foreign conversions, and licensee investment
- Who pays the taxes
- Licensee reporting and auditing information
- Clause stating who will be in charge of maintaining intellectual property
- Lists marking and who will be responsible in the event of infringement
- Section detailing representation, indemnification, and warranties
- Clause prohibiting licensee from challenging the intellectual property of the licensor as well as reverse engineering
- Clause regarding the use of the name of the licensor
- States who will pay for quality control of the product, types and amount of media exposure, customer service, as well as product redesign
- Clause detailing who disputes will be handled, such as mediation, arbitration, the jurisdiction of litigation, and venue
- State the finder’s fee liability
- State employee selection and notice provisions
- Section pertaining to rigs reservation. This disclaims any item that is not covered in the agreement.
- Clause regarding modifying the terms for the agreement
- Must include patent rights exhaustion, including double royalties clause on licensed product
- Clause detailing attorneys fees and who will pay them
- Include disclosure from licensee to licensor in regard to different planning and activities pertaining to the license
- Conditions on licensee with regard to outside subject matter that is licensed, such as a franchise
Specific Checklist Sections
If it is your job to create a license agreement, you can download a checklist of everything that should be included. While it may be obvious what to include, the information in the checklist can save you copious amounts of time when drafting the document.
A checklist will help keep your information in one place, such as the all of the contact information for the negotiating parties, all legal addresses and telephone numbers, and any other pertinent information.
You can utilize “whereas clauses” as a guide for describing the background of a license. Not everyone will need to use these clauses. They may want to include the background information in a separate set of clauses that use language that are specific to the terms of the agreement.
Using background information in a contract is encouraged. In a short timespan after a deal has taken place, the negotiators will often forget certain aspects of the contract. It is important to include a short section of statements that pertain to the background of the deal. This can be a very valuable part of an agreement if ever the contract enters litigation.
You should not need to include a list of definitions for a simple contract. Any definitions that are needed can be provided if and when special terms may arise. Each license will have its own set of definitions.
Patent License Agreement Checklist
A patent license agreement checklist should have the following information:
- Introductory text
- Payment terms
- Records and audits
- Registration and maintenance of intellectual property
- Patent markings
- Use of name
- Export compliance
- Compliance with laws
- Disclaimer of warranties
- Termination by licensee
- Termination by licensor
- Infringement and litigation
- Limitations of liability
- General provisions
- Ending text
In many cases, those who create and own intellectual property, including patents and trademarks, do not want to commercialize on these properties. The licensed properties can include patents, patent applications, technology, and trade secrets.
There are many important factors that should be included so that the licensee can legally use the licensed intellectual property. The licensee must have an order to use the property. Another factor is the time needed to create a business with the licensed property. Finally, the value of appreciation and depreciation in the property over a certain time period should also be included.
With regard to royalties, they can be paid either over time or in one lump sum. Many royalties are based on a formula, in which case the licensor will need to include accounting and reporting requirements within the agreement. With this also comes the obligation of maintaining proper records.
The extent to which the licensor will warrant to what degree that the license cannot infringe on others rights must also be disclosed.
In addition, confidentiality is a must. When it comes to licensing trade secrets and proprietary details, including a confidentiality clause is crucial.
Additional matters, including no assignment, choice of law, and resolution of disputes should also be included.
Patent Licensing Considerations
There are some considerations when it comes to patent licensing. The grand clause is the backbone of a patent license. It provides which rights the licensor is granting to the licensee within the agreement. It also provides with rights are not granted in the agreement.
A broad exclusive license gives the licensee to make, use, sell and import the licensed product. It also allows the utilization of the licensed process within all territories in which it can be used.
A sub licensee has rights that must rely on all rights granted to the existing license agreement. A patent sublicense agreement will need to comply with all terms of the existing agreement and include all relevant information.
To make the process easier, make sure the underlying agreement includes details about how everyone involved will deal with sublicensing.
In general, the United States requires that joint patent owners have equal and undivided interest in the rights of a patent.
A hybrid license includes patent rights. However, it also includes additional rights that a licensee would like to have to ensure that it can completely use the patent rights.
In some instances, one or more parties in the agreement will bring pre-existing intellectual property to the table. This can serve as the base for creative efforts or as a base for research. In general, intellectual property remains to the person or party that brings it into the partnership.
A license checklist is a useful and comprehensive tool that can be helpful for capturing crucial aspects and terms of a contract in a complex licensing agreement.
If you need assistance with developing license agreements for a patent, post your legal need in UpCounsel’s marketplace. Our qualified team of attorneys will be happy to assist you.