When you draft a detailed IP licence agreement, or review someone else’s draft, numerous points of detail will probably need to be considered. Here are some points that came up during recent discussion of a draft licence agreement. They are not the most important issues in a typical licence agreement, but they illustrate how much thought the experienced drafter is likely to put into the wording.
The examples below are all concerned with the wording of the grant clauses.
- In an exclusive licence agreement, do you need to say “exclusive (even as to the licensor)…“? The words in italics are intended to clarify that the licence is exclusive rather than sole, as those expressions are commonly understood. In IP Draughts’ view, these words are unlikely to be necessary in the vast majority of cases, but if a client asks for them he will probably put them in.
- Does licence grant wording need to refer to granting a “right and licence”? IP Draughts thinks it is sufficient simply to grant a licence, unless there are special circumstances (e.g. if a joint owner permits the other joint owner to exploit on an exclusive basis, there is an argument for calling this a right). But he probably wouldn’t cross out the extra words from someone else’s draft.
- If the licence agreement states that the licensee is permitted to sub-license, should the relevant wording refer to multiple layers of sub-licensing (eg allowing sub-sub-licensing), if this is intended? Probably yes, to avoid uncertainty.
- Is there any advantage in saying that a licence is “perpetual and irrevocable” if it goes on to state that is subject to clauses allowing termination for breach or insolvency, and the agreement has a clause stating that, on expiry of the royalty term, the licensee has a continuing non-exclusive licence to use the licensed know-how? Probably not, in IP Draughts’ view.
Multiply these points by the number of clauses in a typical, detailed licence agreement, and you end up with dozens of points of drafting detail. Some of these points have immediate commercial significance, some are points of interpretations that may lie undisturbed until the parties have a dispute, and some are just points of drafting style, which reflect the considered choices of the drafter. The experienced drafter will have a mental checklist of drafting issues for clauses that they commonly encounter.