In present day enterprise natural environment, virtually each and every enterprise depends on 1 sort of engineering or yet another. And for most corporations, considerably of that mission-essential know-how is certified. From licensing program to handle functions and interact with shoppers, to licensing patents or other kinds of mental residence to build products and solutions, technology licenses are ubiquitous in contemporary commerce. But despite their very important worth, companies generally shell out insufficient interest to the precise conditions of these licenses—assuming it is all “regular.” As a final result, organizations usually come across themselves with a license that does not further their enterprise desires. Even even worse, poorly drafted or ambiguous licenses can direct to protracted, expensive litigation that can destroy organization associations, drain companies’ sources, and distract businesses from their real company plans. This article addresses essential criteria to continue to keep in head and frequent pitfalls to stay clear of when negotiating know-how licenses.
Understand Your Business Goals
Businesses license technology to realize business objectives. Nonetheless they usually ignore individuals objectives when negotiating and signing licensing agreements—entering into cookie-cutter contracts with “regular” provisions that can basically inhibit functions. To keep away from this result, a enterprise should have a concrete notion of its plans in advance of coming into into negotiations and communicate them to the negotiating crew.
Evaluation Agreements With Counsel in Mild of Those people Targets
The moment the enterprise circumstance is established and communicated, a firm should scrutinize just about every provision of a proposed license agreement with counsel to guarantee that it furthers people objectives. That includes substantive provisions like termination, upkeep, and heal provisions. It also includes what some consider of as “boilerplate” contractual provisions, this kind of as limitation of liability, choice of law, and arbitration provisions, as these provisions can really condition the parties’ rights and duties.
And most importantly, functions really should be well prepared to stroll away from a licensing deal if the terms conflict with their business enterprise objectives or would not be commercially advantageous. Really don’t think previous general performance will continue despite ambiguous or damaging contract terms. And really don’t allow momentum dictate that execution of a deal is inescapable.
Be Mindful About Pre-Arrangement Contacts
Alongside with concentrating on the licensing agreement by itself, firms should also scrutinize the steps primary up to the final agreement. Letters of intent, memoranda of knowledge, non-disclosure agreements, pre-agreement e-mails and other published communications, and oral income representations can all guide to protracted and expensive litigation. In some instances, agreements to negotiate “in great faith” are binding and enforceable, and they can stop a party from insisting on radically unique phrases or from going for walks absent from the deal without the need of negotiating. Courts in Illinois and elsewhere have awarded events substantial damages, like lost earnings and agreement expectation damages, for a party’s breach of its settlement to negotiate in great religion.