The Licensing Corner

• Citation: Vol. 41 No. 4
• Publication year: 2016
• Author: JOHN PAVOLOTSKY Intel Corporation

The Licensing Corner

JOHN PAVOLOTSKY Intel Corporation

SANE HOGLE Sean Hogle PC

It is our honor and privilege to inherit the New Matter Licensing Corner from the esteemed James Roberts. We thank James for the many insightful articles he has written for this corner of New Matter.

TO HERALD OUR STEWARDSHIP OF THE LICENSING CORNER, we would like to present various "tips and traps" for technology and intellectual property rights licensing practitioners. Please email us your feedback and we may publish the best of that feedback on a follow-up to this article (sean@epiclaw.net, john.pavolotsky@intel.com).

BE CAREFUL WITH THE USE OF "AFFILIATES"

New York and California appellate courts in two (relatively) recent decisions interpreted the definition of "Affiliate" in an IP license to mean affiliates of the licensee in existence as of the effective date of the agreement (see nQueue Inc. v. Control Systems (USA) Inc. (C.D. Cal. 2013) (per express language to that effect in the agreement) and Ellington v. EMI Music, Inc. (N.Y. Ct. App. 2014)). This apparently is the default rule in the absence of clear contractual language to the contrary.

Ellington is particularly instructive. In that case, heirs of Duke Ellington alleged that EMI Music and its predecessors evaded the royalty obligations of the parties' copyright renewal agreement. That agreement called for payment to the heirs of 50% of all net sales by EMI and its affiliates. EMI granted sublicenses to several newly-created, affiliated entities long afterwards, likely for the purpose of minimizing royalty payments to the artists and their heirs, and EMI paid the Ellington heirs 50 percent of the net revenue that it received from these affiliated sublicensees. Notwithstanding the equities of the case, the New York Court of Appeals, over a dissent, held that the "parties' intent to bind future affiliates" must be expressed in "explicit language demonstrating" this intent.

Licensors seeking to capture royalties on sales by future affiliates of the licensee should advocate for a broader definition of "Affiliates." On the other hand, licensors seeking to limit the benefit of the IP license to only those affiliates in existence as of the effective date of the agreement would want the definition to reflect that, as well.

EXCLUDING INJUNCTIONS AND INFRINGEMENT ACTIONS FROM BINDING ARBITRATION

In binding arbitration clauses, exceptions to the duty to arbitrate for injunctive relief claims are common, especially in technology license agreements...