11.6 Intellectual Property Contracts: a Brief Overview
Library | Contract Law in Virginia (Virginia CLE) (2019 Ed.) |
11.6 INTELLECTUAL PROPERTY CONTRACTS: A BRIEF OVERVIEW
11.601 Introduction. The field of intellectual property law is vast, and a thorough treatment of the subject of intellectual property contracts would take volumes in its own right. The object of this paragraph is simply to familiarize the attorney with some of the basic considerations in writing contracts of this type and to provide a few forms that will help the attorney begin to evaluate the elements necessary to draft them.
11.602 License Agreements—Common Elements.
A. In General. Whether dealing with patents, computer software, or trade secrets with only common-law protection, the objects of license agreements are the protection of the benefits of ownership of the
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property, the transfer of rights in the property in exchange for an income stream, and the assurance of effective and profitable marketing of the property. Each agreement must reflect a well-planned licensing scheme. It may be most effective to offer an exclusive license where the property has a narrow market, or where the proposed licensee has the economic power and market leverage to maximize the penetration of the property into the relevant market. Where the owner of the intellectual property wishes to be "at the controls," actively managing the property's commercialization, it may be more appropriate to offer a series of nonexclusive licenses in discrete territories.
A review of the sample license agreements in Appendices 11-1 through 11-3 will reveal the similarity of these concerns across different types of intellectual property.
B. Protecting the Property and Its Development. Intellectual property is anything but static. Smart users and owners will constantly be coming up with new applications, improvements, and combinations of the property with other properties. Thought must be given to whether the owner will seek to obtain the licensee's agreement to turn all improvements and combinations over to the owner or make them available to the owner by a license-back of the improvements or combinations. Strict confidentiality must also be provided for, and the rights of the owner in the property should be required to be appropriately displayed on all copies of the property. Unless the licensee is to be given the right to sublicense the property, there should be specific prohibitions against making the property available to others. There should also be provisions for the return of any copies of the property (and potentially any derivations thereof) at the end of the license term.
C. Royalties. A plan for charging and collecting royalties must be specifically described. If sublicensing is to be allowed, attention needs to be given to requiring the licensee to collect and remit to the owner royalties from sublicensees. Royalties may be set as a one-time fee, a periodic fee, a fee based on volume of use, or where appropriate, a fee for each copy of the property sold. All of this depends, of course, on the type of property involved and its method of use.
D. Record-Keeping Requirements. When dealing with patented or trade secret–protected products and processes, specific records of all sales and uses of the property should be required, and the right of the owner to conduct periodic audits should be provided for in order to ensure full and complete payments of royalties. With computer software, this is normally not necessary since the license payment is normally a fixed or periodic fee.
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But when the fee is based on the number of computers on which the software is to be loaded, it is important to provide for the right to inspect computers in the possession of the licensee.
E. Protection of the Incidents of Ownership. It is normally the...
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