Licensing: How to Avoid Entering into a Badly Drafted Agreement (part II)

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LICENSING:HOWTOAVOIDENTERINGINTOABADLYDRAFTEDAGREEMENT
(PARTII)

FrançoisPainchaudandPanagiotaKoutsogiannis*
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

ThisisthesecondandlastpartofFrançoisPainchaudandPanagiota
Koutsogiannis’sarticleconcerninglicenceagreements.Theauthorswillnow
commentonthefieldofuseinsuchagreements.
Thefieldofuseprovisionrequirescarefulandprecisedraftinginordertoclearly
separatethevariousfieldsofusewhichareoftentoofinelydivided.Thedifficulty
liesintryingtodividefieldsofuseinareaswherethetechnologiesarecomplex
andthereisahighpotentialforoverlapbetweenthelicensedproducts.Thetask
becomesevenmorechallengingwhentheusefulnessoftechnologyhasyetto
beproven.
Inordertoavoiddisputes,thelicensorshouldattempttolicenceusesthatare
indeedseparableandnoncompetitive.Aproblemthatmayresultfromthe
inclusionofafieldofuseclauseinthelicensingagreementisthedivisionofa
naturallycompetitivemarket,whichintheU.S.givesrisetoantitrustissues.When
thedivisionisacommercialoneinsteadofatechnicalone,theinterferencein
naturalcompetitionisevenmoreapparent.Forexample,ifthelicenseeis
prohibitedfromsellingtocompaniesandcanonlyselltoindividuals,heisbeing
refusedaccesstoasubstantialpartofthemarket.Nevertheless,thistypeof
separationhasbeenfoundtobelegalbytheU.S.Courts.Furthermore,thistype
ofprovisionrestrictsthepotentialforinitiativeandexpansiononthepartofthe
licenseewhoislimitedtoaspecificuseofthelicensedproduct.Ineffect,it
prohibitsthelicenseefromrealizingthebenefitsofthelicenceincertain
technicalfields.
Whenthefieldofusecoveredbythelicenceisnotclearlydefined,thelicensee
maybetemptedtoexploitunexpectedusesofthelicensedtechnologywhich
mightdevelop.Thiswillbedisadvantageoustothelicensorwhonegotiatedthe

©CIPS,1998.
*OfLEGERROBICRICHARD
,L.L.P.,amultidisciplinaryfirmoflawyers,andpatentandtrademark
agents.PublishedintheSummer1998issue(Vol.2,No.3)ofourNewsletter.Publication068.014E.

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originalagreementwithonlyacertainuseinmind,andwhoisreceivingroyalty
paymentstoreflectonlythatportionoftheuse,whilethelicenseeisreceiving
morethanhebargainedfor.Afieldofuseclauseshouldtherefore
id
entifytheprecisefieldagreeduponbythepartiesandmaintaintheLicensor’s
rightsinanynewfieldnotforeseenorforeseeableonthedaytheagreementis
executed.
Restrictionontheuseofaproductwillnotbeinferredifthereisnoexpressterm
intheagreementtoimposeapossiblerestriction.InUnionIndustriesInc.v.
BeckettPackagingLtd.(1993),48C.P.R.(3d)523(Ont.C.G.D.),theCourtcame
totheconclusionthatintheabsenceofanyexplicitrestrictions,whena
purchaseracquiresalicenceforapatenteditem,heorshereceivesalicence
todealwiththeiteminanyway.

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