Technology licensing is the authorised use/permission by an entity permitting the lawful and commercial use of its patented technology by another entity as per the limited terms and conditions mutually agreed upon between the parties, while retaining the exclusive ownership of such intellectual property.
In effect, licensing and assignment of any intellectual property determines the status of ownership and governs the right of the concerned party who may effectively sue for infringement of such rights; therefore, it is crucial that a licensing agreement is drafted in a manner that adequately protects the rights of the licensor and ensures that the licensing of such technology does not infringe upon the ownership or intended use of the technology/Intellectual Property.
Drafting of a Technology Licensing Agreement must be done meticulously and in unequivocal terms to ensure that the intended usage of such technology is limited in its scope and the intellectual property rights of the Licensor are well-protected.
In addition, the agreement must expressly stipulate instances which give rise to an actionable claim upon infringement. This article aims to articulate and cull out the necessary factors to keep in mind while drafting a Technology Transfer Agreement which ensures adequate protection of Intellectual Property Rights.
Intellectual Property and Specified Usage
It is crucial that the specific scope of a licensing agreement is restricted and precise and therefore it must necessarily stipulate and define the Intellectual Property sought to be licensed and specify the details of what the Intellectual Property is, provide details of its registration, any further scope of development of the technology.
1. Stipulation of ownership: The agreement must categorically provide for the ownership of the license or several licenses that form part of the agreement in question and specify the same to remain with the licensor.
The agreement must also contemplate eventualities wherein new technology or IP may be created in due course or further developments may be made in the existing and licensed IP and therefore it is necessary that the agreement clarifies on the ownership of such IP during the subsistence of the agreement to retain rights on such technology/IP and leave little room for disputes.
2. Defined terms of usage: At the outset, a Technology licensing agreement must specify the exact terms on which such rights are being licensed, and such grant of control must be limited with their intended use defined and restricted.
In addition to the aforesaid, the specific restrictions and prohibitions qua usage of the Intellectual Property must also be categorically laid down, such as the prohibition on dealing with the Intellectual Property, so as to demonstrate ownership or enter into any agreement for further selling, leasing or loaning the technology to any third party.
3. Whether exclusive/non-exclusive use permitted: It becomes crucial to specify whether a licensee is permitted to exclusive usage of the intellectual property, since it ensures that the right to usage of the technology is retained only with the desired party and is not further disseminated without unchecked knowledge and consent of the Licensor.
In the case of non-exclusive usage, the terms of such permissible use must also be specifically provided for thereby ensuring that a proper channel for such non-exclusive use is maintained which does not infringe upon the rights of the Licensor.
4. Non-transferability of License: It must expressly be stipulated in a Technology Transfer Agreement that the Licensee is granted exclusive and non-transferable rights to specified usage of the technology, thereby ensuring that Licensee remains to be the end user of the technology.
Non-transferability of the License also allows the Licensor to easily monitor adherence to the terms of the agreement and ensure compliance, since it would be difficult to administer the usage of such technology if the same is permissible to be endorsed in favor of a third party.
5. Definite tenure of license: A Licensor must ensure that the rights granted by way of licensing are for a stipulated period of time, since the absence of a categorical term to this effect could inadvertently lead to an interpretation of indefinite right to usage of technology.
Stipulation Qua Monitoring/Reporting Usage
It may also prove to be useful for proprietors to include a clause and stipulation which permits them with the right to monitor and obtain reportage on the existent usage of the proprietary rights. Such auditing may bring forth any irregular instances and draw prompt attention to any breach of the terms of usage and allow for early redressal of the situation with minimal consequential losses arising out of infringements.
Consideration & Royalty Payments
Another aspect to be borne in mind is the commercial value of the technology and the same must be assessed adequately, and subject to the specific licenses in question, it may prove to be gainful to include provisions qua payment of royalties, in addition to the licensing fee for usage of the proprietary technology.
Territorial Restrictions on Usage
To ensure that there are no instances of overlapping usage of the technology in the same industry and for ensuring adherence to non-compete obligations, it may prove to be useful for proprietors to restrict the territorial usage of the licensed technology.
Reserving Rights of Usage with the Licensor
It is crucial to have in mind while drafting a Technology License Agreement whether the proprietor and Licensor desire retaining rights to usage of the licensed technology which are contemporaneous to that of the Licensee.
In the absence of such an explicit stipulation, the Licensor may stand to lose the rights of usage of its own intellectual property despite retaining ownership, and therefore to avoid any room for interpretation, it may prove useful to have an unequivocal clause to that effect.
Conclusion
The successful and smooth execution of any commercial agreement requires meticulous and concise drafting which ensures that the interests of the concerned party are duly and adequately protected. As in the case of Technology Licensing Agreements, it must specifically be borne in mind that the required clauses are carefully articulated to ensure that terms of usage are well defined and ownership retention is explicit.
Such technically watertight agreements become all the more relevant in case of licensing of technology, given the time and costs involved in the development of such proprietary patents and therefore it must be ensured that in case of any breach of contract and dispute between the parties, the interests of the Licensor are adequately secured in the underlying agreement.
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