The Erosion of Licensor’s Rights

04/13/2009

A license agreement traditionally has been thought of as a promise from an intellectual property owner not to sue the licensee for engaging in conduct that would otherwise violate the owner’s rights. A license agreement enables the licensor to generate revenue, while retaining ownership of the intellectual property. In negotiating a license agreement, the licensor tries to retain maximum rights in the intellectual property while granting sufficient rights to justify royalty payments by the licensee. On the other hand, the licensee seeks to pay for only a well-defined set of desired rights. For these reasons, license agreements typically contain lengthy lists of specifically permitted and prohibited uses of the licensed intellectual property that maintain the licensor’s control by fencing in the licensee’s rights.

However, court decisions from the past year have challenged several of these underlying assumptions about licensing agreements and may materially impact the relationship between many licensors and licensees...

© Bloomberg Finance L.P. 2009. Originally published by Bloomberg Law Reports. Reprinted by permission.

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