ABTRACT
This article analyses the growing use of end-user license agreements in connection with the other aspects. The article assesses the public policy implications of broadened enforceability of licenses.
INTRODUCTION
The term “License” is given under Section 52 of the Indian Easement Act, 1882 as “Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful and such right does not amount to an easement or an interest in the property, the right is called a license.”
And the term “Agreement” is defined under Section 2(e) of the Indian Contract Act, 1872 as “Every promise and every set of promises, forming consideration for each other is an agreement.” And an agreement enforceable by law is a contract.
Thus, a Licensing Agreement is a drafted contract between two parties (Licensor and Licensee), where one party (Licensor) gives permission or license to use its property/intellectual property/brand name or trademark/patent technology to the other party(licensee) under a specific set of terms and conditions.
Licensing agreements are contracts between two parties for license, or temporary use of a property, in return for a licensing fee. The contracts states some of the rights of ownership of the property from licensors:
- the party that owns the property
- to the licensee
- the party that possess the property.
Licensing agreements are most often used for intellectual property. Some examples are:
- Patentshttps://ledroitindia.in/courses/patenr-law/
- Trademarks
- Copyrightshttps://ledroitindia.in/courses/copyright-law/
- Movies and music
- Artwork
- Licensing agreements give rise to revenues, called royalties, bring in by a company for authorizing its copyrighted or patented subject-matter to be acclimate by another company.
- Some examples that can be licensed include team logos, songs, intellectual property, mascot, software, and technology.
Along with all the parties that are involved, licensing agreements need to determine in details that how the parties which are involved in license agreement may use properties, consisting the following parameters:
- The geographical location within the bounds of the property may be utilized.
- Decided certain amount of time are assigned to parties to use the property.
- The exclusivity or non-exclusivity of a given arrangement.
- Scaling terms, such that new royalty fees will be sustained if the property is reutilized a certain number of times. For example, a artist may sign a licensing agreement with the other party to use his artwork for their particular notebook business purpose, but not for the other books. publisher may also be restricted from using the artistic image in other advertising campaigns.
Elements of a standard licensing agreement :
- The Licensor(s) and Licensee(s). The licensor is the party who grant the license, while the licensee is the party to whom license is provided.
- The copyrighted material or patent being licensed. This should be correctly and specifically recognized, including any associated trademarks, trade secrets, trade names, and service marks.
- The purpose of the license. This should be explicitly specific and outline the purpose of licensee provided and can be done with the copyrighted material or patent.
- Geographic limitations. Hypothetically, the licensee is only assigned his work to use the copyrighted material or patent within specific particular geographic location or boundaries. In that case, this in the agreement.
- Duration of the license. The duration of the license must be clearly identified in the agreement.
- Licensor’s rights. Licensors should retain all rights not expressly granted to the licensee, including ownership over derivative works created using their copyrighted material or patent.
- Termination clause . This section details how and when each party can cancel or terminate the licensing agreement, usually with a set length of time for advance notice (e.g., thirty days’ notice). Licensors may also reserve the right to cancel licenses if they believe it is necessary to protect their original work. Usually, this is reserved only for cases involving severe infringement by users against terms outlined in the agreement. Licensing agreements are typically perpetual unless otherwise agreed upon by both parties.
- Compensation. The licensor should outline what, if any, form of payment the licensee is required to make in return for using the copyrighted material or patent. This could be a one-time fee or an ongoing royalty stream.
Type of Relationship between Licensor and Licensee
- Exclusive licensing agreement. When a copyright holder grants an exclusive license to use their copyrighted material or patent, they give up all unreleased rights for that particular purpose. They allow the licensee (the party receiving the license) to be the only user of those materials for that specific purpose.
- Non-Exclusive Licensing Agreement. The licensor may be licensing out the IP to multiple licensees. This type of agreement is usually only used when the licensor wants to fully exploit their work and make it available to as many potential users as possible.
- Sole Licensing Agreement. Here, the licensor wants total control over their copyrighted material or patent being licensed. Licensors granting exclusive licenses usually do so to a single individual or company for a limited time period and within specific geographic boundaries. The licensor, in this case, retains all other rights not granted to the licensee.
Since in this example only licensor and licensee are only allowed to use the licensed property, the agreement executed is a sole licensing agreement.
Issues covered by the licensing agreement
- Copyright-A copyright is a legal right that is granted to an author or the creator of an original work. It includes the right to reproduce the copyrighted work, to prepare derivative work based on the copyrighted work, to publicly perform and display the copyrighted work and to publicly perform the copyrighted work using digital audio transmission.
- Thus, a copyright license agreement is executed to grant any of the above-mentioned rights of copyright upon the copyrighted work to the licensee for a specific period in exchange of royalty amount.
- Patent- This type of agreement is executed to allow the licensee to make, use or sell the patent invention or design of the licensor in exchange of licensed fee.
- Know-how- This type of agreement is executed to supplement a patent license agreement. It lays down the procedure of how knowledge and skill, which are required for proper utilization of patent technology, will be transferred.
- Trademark and Service mark– This type of agreement is executed to allow the licensee to use the trademark or service mark owned by the licensor as per the terms and conditions of the agreement.
- Trade secret– It is a unique type of intellectual property that is not registered under any law but still provides protection to those secret data or information that has some economic value for the business enterprise.
Largest areas of concern of licensing agreement :
- Calculation of licensed fee– Since Licensing agreement is all about making money from licensee by allowing him to use the licensed property, deriving a balanced and profitable formula for calculation of licensed fee is always a matter of concern.
- Quality Control– Licensing agreements should specify the licensor’s expected quality of products and services and should also specify the methods of quality control. This is of utmost importance because even a single quality control failure can do massive damage to the brand.
- Scope of usage– Licensor should decide in advance the scope of usage of licensed property as per its worth and future demand. This decision is crucial because in case of a wrong decision, both the licensor and licensee will suffer and the agreement will fail to achieve its desired purpose.
Advantages of Licensing
Licensing agreements have a number of advantages for both licensors and licensees.
- Income. Licensors can generate income from their copyrighted material or patent without fully exploiting it themselves.
- Control. Licensing agreements allow licensors to control how their copyrighted material or patent is used.
- Access. Licensees can get access to copyrighted material or patents they would not be able to use otherwise.
- Protection. Licensing agreements provide a level of protection for licensors in the event of copyright infringement by the licensee.
- Time and Money-Saving. Licensing agreements are typically less expensive and time-consuming to negotiate than other types of contracts such as joint ventures or partnership agreements.
- Long-lasting. Licensing agreements are usually perpetual unless otherwise agreed upon by both licensor and licensee.
- Retain Rights. Licensing agreements allow the licensor to retain all rights not granted to the licensee under the agreement.
- Simplifying. Licensing agreements simplify ownership, control, and payment of royalties in joint venture situations.
Examples of Licensing
- Microsoft Licensing. Microsoft licenses its software products through various agreements, including volume licensing, Select Plus, Open Licensing, and Campus Agreement.
- Apple Licensing. Apple’s licensing agreement for the iPhone and iPad is an example of a sole licensing agreement.
- Google Licensing. Google’s licensing agreement for Android is an example of a non-exclusive licensing agreement.
- Ford Licensing. Ford’s licensing agreement for its patents related to electric vehicles is an example of an exclusive licensing agreement.
This article is written by NAINA SINGH during her internship.
