INTELLECTUAL PROPERTY LICENSING Advantages to Transferring Intellectual Property

INTELLECTUAL PROPERTY LICENSING • Advantages to Transferring Intellectual Property Rights Abroad • Avoid Costs of Exporting Goods • Avoid Problems with Host Country Laws • Minimal Capital Contribution in Form of Direct Investment • Avoid Tariff Problems • Minimal Legal Risks » Concerns about Host Country Laws, Conventions and Host Country Protection of Intellectual Property

INTELLECUTAL PROPERTY LICENSING • Forms of Licensing of Intellectual Property – Technology Licensing-contractual arrangement in which the licensor’s patents, service mark, copyrights, or know how are sold or otherwise made available to a licensee for compensation. – Intellectual Property Licensing-selling or assigning statutorily granted rights to licensee. – Technology Transfer Agreements-additionally provides managerial assistance and know how.

INTELLECTUAL PROPERTY LICENSING • Approach – Due Diligence – Licensing Agreement – Provisions – Common Clauses – Review of Typical Agreement – Law of Licensing Agreement – Foreign Transfer Restrictions

DUE DILIGENCE • Due Diligence-in the exportation of intellectual property, licensor should do a due diligence review. • Must Review Host Nations Approval System • Must Review Registration Requirements domestically and in Host Nation – Copyright Acts in the United States » Requires filing and registration » Instrument of Transfer Agreement should be filed, signed and in writing

LICENSING AGREEMENT • Provisions – Some Nations Will Not Enforce Certain Provisions in Licensing Agreement • European Union – – – Gray Market Goods Infringement Tying Clauses Excessive and Abusive Royalty Provisions Excessive and Abusive Duration and Termination Terms

LICENSING AGREEMENT • Common Clauses – Tying Provisions-requires the licensee to purchase supplies from the licensor or certified supplier – Territorial Restrictions-regulate where licensee may sell good or service. May violate Anti Trust Laws of Host Nation – Choice of Law-designate the law of licensor or licensee as country to resolve dispute. Remember significant contact.

LICENSING AGREEMENT • Common Clauses – Grant Provisions-describes the rights of licensee along with restrictions • • • Limitation of the right to Copy Clearly state licensor title to intellectual property No reverse engineering Termination of Rights of Licensee Exclusive-exclusive rights of licensee in specified territory or non exclusive

LICENSING AGREEMENT • Common Clauses – Grant Provisions • • Field Use Restriction Duration of Grant Geographic Restrictions Goods not Re-enter into Licensor’s Country-Gray Market Goods – Very Controversial-can licensee control exports of secondarily sold goods – Agreement on Trade Related Aspects of Intellectual Property

LICENSING AGREEMENT • Review of Typical Licensing Agreement – Preamble which includes identification of contracting parties and nature of agreement – Recitals-list rights that are being transferred – Definitional Terms-clarification of terms used throughout agreement – Channels of Distribution-licensor defines the appropriate avenues for sales for the licensed product

LICENSING AGREEMENT • Typical License Agreement Reviewed – Covenant Not To Compete-licensee right to compete with licensor-heavily scrutinized provision of agreement by governments – Reservation of Rights of Licensor-licensor reserves all rights not expressly transferred to licensee. – Grant Back Provisions-licensor attempts to reserve future rights to improvements of goods.

LICENSING AGREEMENT • Typical Licensing Agreement Reviewed – Royalty Clause – Computation of Sales » Gross Sales » Net Sales » Hybrid – Accounting and Record Keeping-sales of goods and costs associated with goods – Best Effort Clause-generate maximum sales

LICENSING AGREEMENT • Typical Clauses of Agreement Reviewed – Indemnification Clause-indemnified for any liability stemming from licensor’s title or product – Disclaimer or Limited Liability Provisions – Warranty and Representation Clauses – Infringement Clause – Confidentiality Clause

LICENSING AGREEMENT • Typical Clauses of Agreement Reviewed – Validity or no challenge clause-prohibit licensee from challenging the validity or exclusiveness of licensor’s intellectual property – Restriction on Assignment and Subleasing by Licensee – Non Partnership Clause or Independent Contractor Clause-licensee not acting as agent or partner of licensor

LICENSING AGREEMENT • Typical Clauses of Licensing Agreement Reviewed – Choice of Law Clause – Termination Clause-specific grounds upon which agreement can be terminated • Quality Control • Non Payment of Royalties • Violation of Specific Aforementioned Clauses

LAWS ON LICENSING • Uniform Commercial Code-Article 2 -sale of goods by merchant and mixed sales transactions • United Nations Convention for the International Sales of Goods • Uniform Computer Information Transaction Act » See Chapter 15 for mail box rule, statute of frauds, electronic agents, conditional acceptance and offer

FOREIGN TRANSFER RESTRICTIONS • European Union – Anti-Trust Restriction – Unfair Competition Laws – Price Discrimination – Tying Agreements – Abusive Confidentiality Provisions – Quantitative Production Restrictions – Gray Market Goods

FOREIGN TRANSFER RESTRICTIONS • Registration System or Prior Approval System • China • Government Intervention in the Agreement – Prior Approval by Ministry of Foreign Economic Relations and Trade » Restrictions on selection of materials » Restrictions on acquiring technology from competitor » Restrictions on Post Termination Use of Technology » Restrictions on Grant Back Clauses » Restrictions on Gray Market Goods