Are you familiar with the complexities of patent/know-how licence agreements?

To start with, are you familiar with this type of license? 

These licences are legal agreements between two parties that allows one party (the licensee) to use certain rights associated with another party's (the licensor) patented inventions or proprietary know-how. This type of licensing arrangement grants permission for the licensee to exploit or utilise the intellectual property (IP) owned by the licensor for a specified purpose, typically in exchange for some form of compensation.

In short, a patent licence grants the licensee the right to use, make, sell or distribute a product or service that is covered by a patent. And a know-how licence allows a licensee access to use confidential information. This might include manufacturing processes, techniques or formulas, for example.

In some cases, a single licence agreement might include both patent and know-how components.

Are these licence agreements applicable to your business?

Both patent and know-how licences can be used across many different industries, including:

  • Technology companies
  • Pharmaceutical companies
  • Manufacturers
  • Research institutions and universities
  • Biotechnology companies
  • And other companies entering into joint ventures and collaborations

Essentially, any company that has intellectual property and wants to allow others to use it can agree a mutually beneficial exchange of knowledge and resources with licensees.

What are the key considerations when drafting these types of licence?

A licence needs to include a clear definition of the right to use, make, sell or distribute a product or service or, in the case of know-how, details of the confidential information being licensed.

All licences must specify the scope of the rights granted and details of any limitations of use, including geographic restrictions or field of application.

Agreements should also include a duration that the licence will be in force for and provisions to protect the confidentiality of the know-how to prevent unauthorised disclosure.

What are the main pitfalls to be aware of when drafting?

There are potentially many pitfalls to be aware of when drafting or dealing with these types of licences. It is crucial to avoid these pitfalls for many reasons, but especially because they can be costly and very time consuming. When drafting or considering entering a licence agreement you must consider:

  • Enforceability: complying with relevant laws and regulations is essential to ensure the licence is enforceable.
  • IP protection: any ambiguities in defining the scope of the licence can lead to disputes and challenges to the validity of the licence.
  • Avoiding litigation: including clear dispute resolution clauses will help in resolving potential conflicts without resorting to costly litigation.
  • Preserving confidentiality: safeguarding confidential information is critical and robust provisions for the protection of information will help prevent unauthorised disclosure.
  • Financial considerations: clearly defined royalty terms, payment schedules or other financial agreements will help prevent disputes over payment.
  • Termination provisions: including termination clauses will allow parties to exit the agreement under specified conditions and prevent legal battles if a party wishes to end the relationship.
  • Change of circumstances: building flexibility into an agreement to accommodate changes in technology or market conditions for example, can enable the licence to stay relevant over time.
  • Competition law compliance: ensuring the licence complies with anti-trust laws will avoid legal challenges.
  • International considerations: understanding and complying with international IP laws, trade regulations and other international law considerations is crucial in avoiding cross-border disputes.

To gain a better insight into the important aspects of drafting successful patent/know-how licences join our expert trainer on either our one or two-day Avoiding Pitfalls in Patent/Know-how Licences and R&D Collaborations training courses.

Running on various dates throughout the year, these courses focus on the pitfalls and ambiguities to avoid in these agreements and take you through the stages of project management so you can achieve precision regarding IP definitions, ownership and use.

 

Published on Oct 17, 2024 by Angela Spall