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 Research, Technology, Innovation
Technology Opportunities
Licencing Opportunities
Licensing Agreements: Do's and Don'ts
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 The Do's and Don'ts of Licensing Agreements - Expanded Table of Contentsby: John T. RamsayVice-President - Canada Licensing Executives Society (USA/Canada)
Macleod Dixon (403)267-8222 March, 1994 TABLE OF CONTENTS 1. INTRODUCTION 2. CASE STUDY 3. DREADFUL DRAFTER WRITES A "RELEASE" 3.1 Dreadful Drafter and his Word Processor's First Draft
3.2 Dreadful Drafter's Legalistic Style
Tactic: Do not let the word processor produce verbosity 3.3 Drafter as Negotiator
3.4 Communication with Client
Tactic: Recognize drafting as part of the negotiating 3.5 Dreadful Drafter's Second Draft of the Release
Tactic:
Use paragraph sculpturing for ease of reading and analysis 3.6 Dreadful Drafter's Third Draft
Tactic:
Use definitions to achieve clarity 3.7 "Unless the Context Otherwise Requires"
Tactic:
Drafting laziness should not detract from
precision 3.8 Expansive Definitions
Tactic:
Wherever possible, design definitions to limit and
not expand the meaning . . 3.9 Coupled (Tripled?) Synonyms
Tactic:
Eliminate redundant words - less is more 3.10 Boilerplate Produces a Checklist
Tactic:
Precedents (however written) are a valuable source
when developing checklists . . 3.11 Long, Long Sentences Increase the Risk of Errors
Tactic: Avoid verbose, sloppy writing that may produce surprising results Tactic: Proofread carefully long, long sentences 3.12 Cross References Must be Precise
Tactic: Verify cross-references Tactic: Forego the use of imprecise old English words 3.13 Lists
Tactic:
Phrase lists carefully; avoid application of Latin
maxims 3.14 User Friendly Language
Tactic:
Use user friendly language if possible 3.15 Concise But Precise
Tactic:
Simple is not stupid: simple expresses the
substance of the business and legal intent
succinctly 3.16 Licensor/Licensee
Tactic:
Use distinctive words to describe the parties;
avoid both "Licensor" and "Licensee" 3.17 Block Capitals
Tactic:
Do not use BLOCK letters for defined words, it
BLOCKS the communication flow 3.18 Visual Appeal
Tactic: Make your documents visually attractive Tactic: Market! Market! Market! 4. DREADFUL DRAFTER WRITES AN "EXCLUSIVITY" CLAUSE 4.1 Use of Specialized Words
Tactic: Be careful with words that have specialized legal meanings 4.2 Isolate Separate Business/Legal Issues
Tactic: Assist the business decision maker; write
early drafts to set out the issues 4.3 Consider Footnotes Tactic: Use footnotes in early drafts to improve
communication with the business decision maker 5. BEST EFFORTS 5.1 Best Efforts
Tactic:
Avoid the phrase "best efforts"; it may be an
invitation to litigation 5.2 Reasonable Efforts
Tactic:
Use reasonable efforts to avoid the phrase
"reasonable efforts" too 5.3 Minimum Performance Tactic:
Specify minimum performance requirements 6. DEVCO GETS 5% ROYALTY 6.1 "Sales" versus "Revenues"
Tactic:
Beware of vernacular; it may change the legal
context 6.2 Source of Revenues
Tactic:
Define "revenues" 6.3 Non-Cash Consideration
Tactic:
Consider the effect of non-cash consideration be included in the royalty base 6.4 Exceptions from Revenues
Tactic:
Include the Exceptions 6.5 Triggering Event
Tactic:
ROGER!: TRIGGER the ROYalty 6.6 Bundling
Tactic:
Break the Bundle 6.7 License Fee vs. Support Fee
Tactic:
Avoid predatory pricing 6.8 Interco's Affiliates
Tactic:
Prevent affiliates from scooping profits 6.9 Tax Treatment
Tactic:
Tax Plan: Avoid contributing to Government excesses 6.10 Invalidity of Intellectual Property Rights Tactic:
Crown jewels to costume jewelery: whither the royalty: 7. CONFIDENTIALITY OF TRADE SECRETS 7.1 Definition of Trade Secret
Tactic:
Know your technology 7.2 Possible Definition
Tactic:
Consider adopting a well-known definition 7.3 Categories of Trade Secret
Tactic:
Tailor the definition for the circumstances 7.4 Participation
Tactic:
Participate in the drafting of the definition 7.5 What is to be Kept Confidential
Tactic:
Beware of public domain information in a
confidential cloak 7.6 Contract vs. Trust
Tactic:
Consider the appropriate remedies: contract vs.trust 7.7 What is Fair
Tactic:
In short-fuse negotiations, design the first draft to produce a "win-win" result 7.8 The Word "Ensure"
Tactic:
Use "ensure" only when you mean "guarantee" or
"insure"; better yet, doen't use it at all 7.9 Precautions to be Taken
Tactic:
Secrecy obligations should include objective
standards 7.10 Steps to be Taken
Tactic:
Consider stating what secrecy measures are
required 7.11 Duration of Secrecy Obligations
Tactic:
Establish and justify the duration of secrecy
obligations 7.12 Limited Liability
Tactic:
Consider limiting Licensee's liability for
inadvertent disclosure 7.13 Permitted Use Tactic:
Specify permitted uses 8. IMPROVEMENTS 8.1 Does the Word "Improvement" Have a Meaning?
Tactic:
Use words that have precise meanings or the document invites "creative misinterpretation" 8.2 An Improvement Must "Infringe"
Tactic:
Define the word "improvement" 8.3 Communication of Improvements
Tactic:
Make the draft answer "how, who, when, what" 8.4 Term of Use of Improvement
Tactic:
Co-relate the term of use of improvements with the
term of the underlying license 8.5 Only in Canada You Say Tactic:
Watch foreign anti-restraint of trade rules 9. WARRANTIES 9.1 A Warranty by Any Other Name
Tactic:
Design warranties that are "fit for the purpose" Tactic: Avoid clauses drafted for the specific rules of other jurisdictions 9.2 You Wanted It To Work?
Tactic:
Tailor warranties for each technology transfer 9.3 Disclaimer "Fundamentally Breaches its Essential Purpose"
Tactic:
Be satisfied that a total disclaimer of warranties
of quality is appropriate 9.4 Basic Warranties of Quality
Tactic:
Specify standards of quality 9.5 Conditional Warranties
Tactic:
Correlate conditions precedent to a warranty to
the quality defect 9.6 Back-Up Remedy Tactic:
Consider providing a back-up remedy 10. TERM AND TERMINATION Tactic: State clearly the effective term of the agreement
10.1 License Exceeding Patent Term
Tactic:
Determine if the applicable law will allow for the obligations under a license agreement to exceed
the term of statutory (e.g., patent, copyright) protection 10.2 Terminating Events
Tactic:
Define the terminating events for each right and
obligation 10.3 Consequences of Termination
Tactic:
Consider the consequences of termination. . . . . 10.4 Bankruptcy Tactic:
Draft termination on bankruptcy provisions
specifically for the relevant applicable
bankruptcy laws 11. INCLUSIVE LANGUAGE Tactic:
Strive for inclusive language 12. CONCLUSION 13. AUTHOR'S NOTE Appendix A Checklist for International Licensing Agreements
Appendix B Checklist for Confidentiality Agreements
Endnotes
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| Created: 2003-02-13 Updated: 2004-03-18 |
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