Intellectual Property Outline
Fall Semester 2015
Professor Michele Farber
BASICS
The License—It is a right to use someone’s Intellectual Property
· Generally NO ownership is transferred
· The law in many states disfavors contracts of perpetual or indefinite duration for public policy reasons
· MUST understand the underlying IP to proceed for your client (NOTE à it could be multiple in a single agreement (due diligence!))
· Make sure OR is the actual owner!!!
o Source of origin
· Infringement à (1) infringer is liable for monetary damages and (2) you can seek an injunction
· Do NOT wait until the 11th hour to receive schedules/appendices
· Always use “Business days” not just “days”
Top 10 Mistakes in License Agreements
(1) Not Conducting Due Diligence—Parties should undertake reasonable (1) business AND (2) legal due diligence (THEY ARE DIFFERENT)
a. Failure to do so exposes a party to serious risk of loss or liability
i. Consider both the potential liabilities (e.g. third-party suits for infringement) and potential losses (e.g. loss of licensed rights or license revenue) that may result from the license agreement
ii. Consider ability to recover any such liabilities or losses
b. Search for valid copyright, trademark, etc.
c. Encompasses a few other points as well
(2) Ignoring Legal Framework—there are many legal rules that are unique to license agreements and specific IPs
a. Antitrust Laws—body of law designed to protect trade and commerce from restraints, monopolies, price fixing and price discrimination. (Sherman Act and Clayton Act)
i. Frequently arises in the context of license agreements
ii. There is NO safe harbor under the antitrust laws for the licensing of IP
iii. Manner in which the owner exploits such IP is even subject to scrutiny under the antitrust laws
b. Doctrine of Patent Misuse—patentees shall not be allowed to use their patent to effectively broaden the scope of their monopoly in restraint of trade or otherwise against the public interest
c. Tying—granting license with the condition EE also takes other licenses
i. May be illegal under the Sherman Antitrust Act or Clayton Act
(3) Creating Terminal Confusion (most important)—each license agreement should clearly define: (1) term; (2) any events that may trigger termination of the license; and (3) the effects of any expiration or termination of the license agreement
a. Contradictory Provisions—to avoid a license agreement should (1) have a SINGLE provision that addresses the duration of the license; (2) collect termination triggers in a SINGLE provision (or one that cross-references them) rather than sprinkling them throughout; and (3) a provision that address the effect of expiration or termination on any existing license rights or obligations
b. Avoid ambiguity about the term or any events
(4) Exposing Secrets—parties should carefully review confidentiality provisions to ensure their adequacy and consider taking additional steps to protect sensitive information (e.g. locked cabinet).
a. Nondisclosure Agreements (NDAs) are CRUCIAL
i. But do NOT rely on the “standard” confidentiality provision
b. Balance à the need to protect the information AGAINST the risk of being overexposed to the CI of the other party
c. Can define the scope of the CI under the agreement and how it should be protected
(5) Gambling on Liability—parties often fail to consider the liability provisions that allocate liability between them as carefully as they should.
a. Balance à the need to limit exposure to liability AGAINST the need for meaningful remedies
b. Avoid Short Circuits à created if an indemnity provision allows a party to pursue a claim for breach of contract that bypasses the liability provisions that would normally apply to a breach of contract claim
(6) Not Watching the Money—clear up royalty provisions
a. Essential for parties to carefully document the royalty provisions in a license agreement
b. Test the contract language against all likely scenarios and all key assumptions and verify that it addresses them correctly
c. Include examples of sample calculations to illustrate the correct interpretation of the contract language
d. OR à include a provision that requires payment of a specified minimum royalty on either an individual sale or on an aggregate basis to mitigate the risk of a poorly defined royalty provision
e. (NOTE à financia
sions:
o Copyright Use, Protection and Infringement
§ SEE “For a Copyrightable Motion Picture
o Representations, Warranties & Indemnification
Key Overall Terms à Most important: (1) Commencement Date, (2) End Date; and (3) Signatures
· Term—every agreement needs a start (commencement) and end date
o “Survival Clause”—typically a confidentiality requirement is in this
o Always better to have a date cited than just “effective upon execution of this agreement”
· Parties—Insert (1) names of parties, (2) place of business
o When dealing with major corporations, an IP may be owned by the corporations subsidiary
o If incorporated company, state of incorporation is their place of business
· Recitals—gives a little history, subject matter to the agreement, the intentions and desires, etc.
o “WHEREAS” statements at beginning
o Probably contains “Consideration Clause” à all agreements have these
§ MEMORIZE: “Now in consideration of the foregoing, the covenants hereinafter set forth, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows:”
o Often overlooked section
· Defined Terms—shorthand way of referring to things in the agreement
o Three Types
§ (1) (LICENSEE)
§ (2) (the “Licensed Work”)
§ (3) Definition sections
· Territory—MUST define
o OR might not own in a specific country so make sure they are not “licensing” for this area (think à Chromeo deal)
o This always a defined term
· Schedules—can contain a lot of useful, highly important information at the end
o Sometimes will say “To be added.” à DO NOT ALLOW THIS
o Examples:
§ The actual IP
§ Country of registration
§ Registration number
· Three most common, rest are examples, but not common
§ Registration date
§ Application Number
§ Application date
§ Renewal dates
§ Owner
§ Goods or services covered by registration
