Licensing: How to Avoid Entering into a Badly Drafted Agreement Part I

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LICENSING:HOWTOAVOIDENTERINGINTOABADLYDRAFTEDAGREEMENT
PARTI

FrançoisPainchaud*

LEGERROBICRICHARD,L.L.P.
Lawyers,PatentandTrademarkAgents
CentreCDPCapital
1001Square-Victoria–BlocE–8thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242–Fax(514)8457874
www.robic.ca–info@robic.com

Thelegaldraftingofagreementssuchaslicensingandtransferoftechnology
agreementsisusuallylefttoprofessionals;however,itisoftenimportantfor
businesspeopletohaveaclearerunderstandingofsomeoftheissuesthatmay
ariseinthenegotiationanddraftingofsuchtransactions.Inaseriesofarticles,
wewillgothroughsomeofthekeypointsthatarecommontobothlicensing
andothertypesoftechnologytransferagreements.
Grantofrights
Thegrantprovisionistheessenceofalicensingagreementbecauseit
establishesthesubjectmatterofthelicenceandtherightsthataretobe
extendedtothelicensee.Itisveryimportanttoadequatelydefinethe
technologythatwillbetransferred.Ifthisclauseisunclearorimproperly
understood,itcouldresultinadisputebetweenthepartieswhichmay
eventuallyrequiretheinterventionofthecourts.
Thelanguageusedinlicensingagreementscansometimesbeambiguous.A
termthatisknowntomeanonethinginonecountrymaynotbeknowntohave
thesamemeaninginanothercountry.Thisisespeciallytruewhendistinguishing
betweenthegrantofan”exclusive”,”sole”,and”non-exclusive”licence.The
grantofanexclusivelicencecustomarilyprecludesthepossibilityofwithholding
aright.
However,insomecountries,theword”exclusive”standingalonecanbe
ambiguousbecausealthoughitcertainlymeansthatnootherlicenseescan
becontemplated,itisnotalwaysclearwhetherthelicensorhasalsoreserved
forhimselfanyofthelicensedrights(thisisusuallyreferredtoasa”sole”licence).

©CIPS,1998.
*OfLEGERROBICRICHARD
,L.L.P.,amultidisciplinaryfirmoflawyers,andpatentandtrademark
agents.PublishedintheSpring1998issue(Vol.2,No.2)ofourNewsletter.Publication068.013E.

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Thewords”soleandexclusive”aresometimesusedtogethertodescribean
exclusivelicencebutshouldbeavoidedbecauseinfactthetermsare
contradictory.Furthermore,anexpressionsuchas”openexclusivelicence”which
issometimesusedwillnotnecessarilymeanthesamethingforonepersonasit
willforanother.Insuchcasesitisessentialtoincludefurtherdescriptive
languageinordertoleavenodoubtastothelegalcharacterofthelicence
beinggranted.
Thegrantprovisionmustalsoforeseetherighttoeithermake,useorsellthe
licensedproductoracombinationoftheserights.Whenthegrantprovidesfor
therightto”make,useandsell”,apatenteeiscompletelywaivinghisrightto
excludethelicenseefromenjoymentofthepatentedinventionwithinthe
territorytowhichthepatentpertains.Itisthereforeviewedasnotnecessaryto
usewordssuchas”havemade,…lease,…orotherwisedisposeof”.Ifsuchwords
areused,thecourtsmaybeforcedtointerprettheclauserestrictivelysince
therehasbeenadeparturefromthecommonlanguageusedintheseclauses.
Hence,itisnotalwayswisetotrytoclarifybyaddingmorelegaltermswhichare
notnecessary,becausethiscouldhavetheoppositeeffectandmaycause
confusion.Ifsuchtermsmustbeusedbecauseofsurroundingcircumstances,
theyshouldbeusedinanon-limitativelist.
Therightstomake,useandsell,althoughoftenseentogether,areseparable.
Howeveragrantthatonlyprovidesfortherighttomaketheproductwouldbe
uselesswithouttheadditionalrighttoeitheruseorsellsuchaproduct.Itis
thereforeverylikelythatwhenthegrantprovidesonlyfortherighttomakethe
product,thecourtswillalsoimplyarighttouseorsell.
OurnextNewsletterwilltouchuponsectionsoftennotthoroughlyconsideredby
thepartiestoanagreement,forexample:”most-favoured-licensee”clausesand
“besteffort”clauses.Ifyouwishtoobtainmoreinformationconcerningthe
aboveissuesoranyotherissuesrelatingtolicensingandtechnologytransfers,do
nothesitatetocontactFrançoisPainchaudoranyothermemberofour
TechnologyTransferGroup.

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