IP Licensing Drafting Issues

By: Reid Jennings, 3L, Gonzaga University School of Law

This is an overview of the presentation given by K&L Gates attorney, Nancy S. Kim, at the WSBA Intellectual Property Institute regarding the issues that crop up when drafting IP Licensing agreements.  These were some of the highlights and takeaways from the presentation.

The first step when meeting with a client regarding an IP licensing transaction is to educate the client about the most common terms covered by these types of agreements. A partial list of topics and terms that should be covered are discussed in the General Drafting Tips section below.  The next step to be taken when meeting with a client is to figure out what IP the client wants to license and what rights in the IP those licenses will grant.  For example, consider whether software and/or the source codes are going to be licensed and whether the licensee has the right to reproduce such material.  Finally, after the broad scope of the agreement has been determined, you should help the client to formulate approaches to each of the topics of the agreement.

• Topics to specifically address in your IP licensing agreement
• Work made for hire – this issue is present in many IP licensing agreements (this is especially relevant for employee-employer relationship).
• Extra security built into agreement in the form of assignment to any outside collaboration or outside exposure to the IP.
• Make sure to include the scope of the license grant (this includes all the applicable terms from the statutes – e.g. for patent, you should include terms addressing make, use, have made, offer to sell, sell, import).

• General Drafting Tips and issues
  • License Conditions v. Contract Covenants – broader damages are allowed for license conditions (license grant is subject to another event, such as promise not to do something).
  • Licensee v. Licensor – who are the parties actually benefiting from the agreement (is a third party receiving deliverables with licensee’s added work or is licensee passing IP straight through).
  • Restrictions that should be included – reverse engineering; open source access; disclaimer of implied licenses; export restrictions (licensee may gain implied rights if those rights are not disclaimed).
  • Term and Termination – these must be considered in terms of clients short and/or long-term goals, the relationship of the parties, and the type of technology
  • Confidential and Sensitive Information concerns – should also consider specific remedies for breach of these obligations.
  • Indemnification – licensee indemnification from licensor or mutual indemnification; insurance; choice of counsel; rights/obligations of parties (settlement approval, notice, cooperation with litigation, etc.).
  • Warranties and Limitations of Liability – non-infringing use warranties; any other excluded warranties.
  • Assignability – whether the IP can be assigned; approval by licensor; portions of IP to be assigned; limitations on assignment.