Most Favoured-Licensee Clauses in Licence Agreements

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MOSTFAVOURED-LICENSEECLAUSESINLICENCEAGREEMENTS

PanagiotaKoutsogiannis*
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

Theextentoftherightsgrantedtoalicenseeisoftendeterminedbythetypes
ofclausesfoundinthelicensingagreementbetweenthelicensorandthe
licensee.Theknowledgeandunderstandingofsuchclausesisessentialtothe
draftingandinterpretationoflicensingagreements.Thefollowingarticle
describesatypeofclausewhichcanbeincludedinlicensingagreements.
Thelicensorwhoentersintoalicensingagreementshoulddoeverything
possibletoavoidincludingamost-favoured-licenseeprovisioninthe
agreement.Thelicenseeontheotherhandwillwanttomakesurethathe
includesaprovisionwhereheistreatedaswellasasubsequentlicensee,if
notmoreadvantageous-ly.Ifthepartiesdodecidetoincludesuchaclause
intheagreement,itshouldbedraftedverycarefully.
InarecentAmericandecision,StudiengesellschaftKohle,m.b.v.HerculesInc,
105F.3d629(Fed.Cir.1997),weseethedisadvantagesthatcouldarisefora
licensorwhoincludesamost-favoured-licenseeprovisioninthelicensing
agreement.Inthiscase,theCourtwasforcedtoconcludethatthelicensor
hadbreachedthelicensingagreementwhenhehadfailedtoinformthe
licenseeofalicencethathehadgrantedtoasubsequentlicensee.The
originallicenseehadmanagedtohaveincludedintheagreementavery
broadmost-favoured-licenseeprovisionandwhenthetimecametohaveit
interpreted,theCourthadnochoicebuttoruleinthelicensee’sfavour.
Thebiggestproblemwiththistypeofprovisionisthatnotenoughthoughtis
giventothecontentandnotenoughlimitationsareplacedonits
applicability.Innegotiatingthistypeofclausetherearecertainfactorsthat
needtobetakenintoconsiderationaspossiblerestrictionstotheclause:i)a
timeconstraintcouldbeplacedinthelicence;ii)therecouldbealimitation




























































©CIPS,1999.
*OfLEGERROBICRICHARD
,L.L.P.,amultidisciplinaryfirmoflawyers,andpatentand
trademarkagents.PublishedintheSpring1999issue(Vol.3,No.2)issueofourNewsletter.
Publication068.020E.

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tospecificpatentsand/orpendingapplications;iii)themost-favoured-
licenseeclausemaybelimitedtonon-litigationrelatedlicenses.
Ifsuchaclauseistobeincludedintheagreement,thelicensorshouldrequire
thatthelicenseebeforcedtoacceptallthetermsthatappearinthemore
favourableagreement,ratherthanallowinghimtochooseonlyselected
termsthataretohisadvantage.
Othertypesofclausesinlicenceagreementswillbereviewedinan
upcomingeditionofourNewsletter.

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