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 Research, Technology, Innovation
Technology Opportunities
Licencing Opportunities
Licensing Agreements: Do's and Don'ts
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 4) Licensing Agreements: Do's and Don'ts - Dreadful Drafter Writes an "Exclusivity" ClauseDreadful Drafter looks again at his President's second instruction "Devco gets all U.S. and England" and realizes that this refers to the exclusivity of Interco's distribution rights. Dreadful Drafter writes "Devco hereby grants to Interco the sole and exclusive license to market the Licensed Software in the United States and England."4.1 Use of Specialized Words What does "sole and exclusive" mean to the reader? Does it mean that Devco can market the Licensed Software in the United States and in England along with Interco? Can any of Devco's other distributors market it in the United States or in England? Can Devco license the Licensed Software to a company based in Canada for use in its U.S. offices? The words "sole and exclusive" selected by Dreadful Drafter do not resolve these issues. Indeed, under Canadian law they are a contradiction of terms.(21) "An exclusive license gives the licensee the right to exercise the [intellectual property rights] as against all persons, including the licensor. [A] sole license gives to the licensee the right to exercise the [intellectual property rights] as against all persons except the licensor".(22) It would be better if words such as "sole" and "exclusive" were not used in the grant clause since their specialized legal meaning is not apparent from their ordinary usage. ****TACTIC: BE CAREFUL WITH WORDS THAT HAVE SPECIALIZED LEGAL MEANINGS. 4.2 Isolate Separate Business/Legal Issues Instead of using legal "buzz words", Dreadful Drafter could write a separate section setting out in detail the extent of the "exclusivity" which is granted to Interco. When isolated in its own section, the business issues can be more fully communicated to the business decision makers. Examples of issues to be considered are: (a) Will all licenses to Canadian companies require the user to be situate in Canada? (b) If other distributors are appointed for other countries within the European Common Market, is it legally possible to restrict these distributors to specific territories within the European Community or will such restrictions violate the "one market" principles set out in Article 85, the doctrine of exhaustion, or elsewhere?(23), and (c) How will cross-referrals be dealt with by Devco and all its authorized distributors? For example, who provides support, installation, and who delivers the Licensed Software and the related manuals? ****TACTIC: ASSIST THE BUSINESS DECISION MAKER; WRITE EARLY DRAFTS TO SET OUT THE ISSUES. 4.3 Consider Footnotes In the first draft released to the Devco President, Dreadful Drafter could use footnotes to discuss the risk/benefits of issues raised. This form of communication will let the President more readily understand what issues the drafter is addressing and assess the merits of the various alternatives available. ****TACTIC: USE FOOTNOTES IN EARLY DRAFTS TO IMPROVE COMMUNICATION WITH THE BUSINESS DECISION MAKER.
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| Created: 2003-02-13 Updated: 2004-03-18 |
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