In 2000, the UK department store, Marks & Spencer, unveiled a new strapline, Exclusively for Everyone, that was to feature in their advertisements for nighties for most of the Noughties. Well, for all their products, really, but IP Draughts is susceptible to a finely-turned alliteration.
Every time he saw this strapline, the pedant in IP Draughts thought: you can’t be exclusively for everyone. It is a self-contradictory statement.
Another phrase that induces this reaction in IP Draughts is sole and exclusive licence. You can’t have a sole and exclusive licence. It can be sole or it can be exclusive. It can’t be both at the same time.
Usually, when the phrase appears in a licence agreement, the drafter intends to grant (or be granted) an exclusive licence. IP Draughts has never encountered a drafter who argued to retain sole and exclusive when the potential contradiction was pointed out. Typically, the phrase appeared in the template that the drafter used, and they didn’t change it before issuing the first draft.
So, why do some template licence agreements purport to grant a sole and exclusive licence? This is a mystery. If any reader can shed light on it, IP Draughts will be very grateful.
Most IP lawyers (IP Draughts would not presume to know the views of all IP lawyers; some of them have some very strange ideas) would understand the terms as follows.
If a sole licence is granted by a Licensor to a Licensee, the Licensor promises not to license anyone other than the Licensee within the scope of the licence, but the Licensor retains the right to conduct the licensed activities itself.
If an exclusive licence is granted, the Licensor promises not to license anyone other than the Licensee within the scope of the licence, and the Licensor also promises not to conduct the licensed activities itself.
There is no “official” definition of these terms, of which IP Draughts is aware, that would apply when the terms appear in contracts. Exclusive licence is defined in some of the UK IP legislation, but only in relation to the use of that term in the legislation. For example, section 130 of the Patents Act 1977 defines exclusive licence as follows:
“exclusive licence” means a licence from the proprietor of or applicant for a patent conferring on the licensee, or on him and persons authorised by him, to the exclusion of all other persons (including the proprietor or applicant), any right in respect of the invention to which the patent or application relates, and “exclusive licensee” and “non-exclusive licence” shall be construed accordingly
Similarly the EU Technology Transfer Block Exemption Regulation defines “exclusive territory” for the purposes of that Regulation only, as:
a territory in which only one undertaking is allowed to produce the contract products with the licensed technology…
These definitions are consistent with the explanation of the term earlier in this blog posting.
Some US lawyers apply some “belt and braces” (or “belt and suspenders”) by adding to an exclusive licence the words “even as to the licensor” (as in “X grants Y an exclusive (even as to the licensor) licence…”). These words emphasise that the licence is not a sole licence.
IP Draughts’ friend, Ken Adams, has argued that the distinction between sole and exclusive is one made up by lawyers, and that the distinction is not obvious from the words themselves. Put another way, using these terms is “magic wordery”, and should be avoided. IP Draughts does not subscribe to this view (although he doesn’t feel strongly about the point), as he feels these are technical expressions which should be used correctly, just as one should use the terms assignment, lease and charge correctly. However, this objection can be overcome by defining the terms in the contract. This may be desirable in any event if the drafter is concerned about the effect of EU competition law on the licence agreement. The wording of exclusive licence clauses that seek to take into account EU competition law is beyond the scope of this posting.
Occasionally, IP Draughts has encountered semi-exclusive or co-exclusive licences. He would definitely recommend defining these terms, as they are not in common use. Typically the intended meaning is a variant on a sole licence. The Licensor may not be able or willing to exploit the licensed IP itself, and may wish to appoint another company to do so in its place. A semi-exclusive or co-exclusive licence, depending on how it is worded, may allow the Licensor to appoint a licensee in its place. Thus the maximum number of parties exploiting the IP is two: (1) the Licensee, and (2) the Licensor or his substitute.