Emily Bayton, Partner and Co-Practice Group Leader in Lewis Roca Rothgerber’s Intellectual Property (IP) practice presented Common Licensing Mistakes at the World IP Day - LES Arizona event this morning. The event was live-streamed and we will have the link on our site shortly.
Ms. Bayton outlined many important issues to help avoid licensing mistakes and her slides are available here.
The best pieces of advice for startups are to seek legal advice when you are licensing your valuable IP and do not rely on boilerplate agreements that you pluck from the Internet!
A few other takeaways from Ms. Bayton’s talk are listed below:
Understand scope of your intangible assets
It’s not enough to just know that you have IP but you need to understand what territory is covered and who owns the IP. Particularly important for patents – are you licensing inside the US or internationally? And are there co-inventors and co-owners? That can make the licensing very complex.
Define grants of rights
Your rights are at the heart of the licensing agreement and you need to define very carefully the classic “who, what, when, why and how” of all those rights. That includes whether you are granting exclusive, non-exclusive, sole or hybrid rights to your IP. This is such a complex area that early professional consultation is critical.
Outline who owns any improvements to IP
Startups often are lured into the deal by the upfront customization fees and early win of signing a licensing deal. However, defining who owns any upgrades or improvements to the IP must be determined at the outset.
Address assignment rights
Assignment is an essential provision for startups that are hoping to be acquired. An acquiring company will need to see that the licensing agreement can be transferred over or assigned. Great tip!
Have a robust termination clause
In order to avoid being trapped in a bad agreement where, for example, the licensed IP is not being marketed at all by the licensee, a termination clause that provides for different scenarios should be included. Plus, do not forget to outline what happens to all the licensed rights post-termination.
When entering into an agreement where there are payments based on users or sales, it is very important to include the right to review the licensee’s books and records to verify the reported numbers.
Enforcement or litigation rights
Not that anyone wants to end up in litigation, but it is smart to provide for what is going to be policed and how. This is particularly important for policing of proper brand usage when trademarks are involved.
Thank you again to Ms. Bayton and gratitude to LES Arizona and Intellectual Energy for their support.
Happy World IP Day!