Licensing

Question 1

What is Technology Transfer and why is it useful?

Answer 1

The legal relationship between the transferor and the transferee of technology. It enables the transferor to sell or license her IP.

Question 2

What is an Assignment?

Answer 2

The purchase of the exclusive rights from another person or legal entity.

Question 3

What is Licensing?

Answer 3

The permission by the owner to another person or legal entity to perform one or more of the acts which are covered by the exclusive rights in the country and for the duration of the patent rights.

Question 4

What types of technology transfer contracts are there?

Answer 4

• Assignment and licensing of IP
• Know how contracts
• Sale and Import of Capital goods
• Franchising and Distributorship
• Consultancy Agreement
• Turn-key projects
• Joint Venture Agreements

Question 5

What is the licensing contract?

Answer 5

Legal document where the details of the deal are specified.

The legal form of the document is prescribed by the patent law or commercial law.

In some countries, the contract has to be presented to the relevant office for registration and hence recognition, and it may be subject to review or examination.

Question 6

What is the Know-how contract?

Answer 6

Usually included in the licensing contract.
Sometimes it makes sense to keep it separate, in the “know-how” contract.

Where the supplier of the know-how undertakes to communicate the know how to another party.
Know-how might be communicated in tangible or intangible form.

Question 7

Describe the Sale and Import of Capital Goods

Answer 7

Sale of capital goods may be considered a form of technology transfer transactions.
Relevant provisions may be indicated in the license contract or know-how contract.

Question 8

Franchising and Distributorship

Answer 8

A franchise or distributorship is a business arrangement where the reputation and technical expertise of a party are combined with the investment of another party for the purpose of selling goods and sharing profits.

Question 9

Consultancy Agreement

Answer 9

Consultations are forms of know-how transfer.

Question 10

Turn-Key Project

Answer 10

Business arrangement where one party undertakes to hand over to her client an entire industrial plant that is capable fo operating in accordance with agreed performance standards.

Question 11

Joint Venture Agreements

Answer 11

1. Equity JVE. A separate legal entity is created in accordance with the agreement of two or more parties.
2. Contractual JVE. Might be used when the establishment of a separate legal entity is not needed or possible. or where law doesn’t recognise ownership of property by foreigners.

License contract, know-how contract, technical services contract or franchise contract might form annexes of the Joint Venture Agreement.

Question 12

What are the key elements of a licensing contract?

Answer 12

Any technical licensing contract may be analysed in respect of the following basic elements:

• subject of the contract
• licensor’s obligations
• obligations common to both parties

Important aspects of the licensing contact:

1. Identification of the parties
2. Objectives of the parties: scope of the license
3. Subject Matter
4. Identification of product or process
5. Identification of the invention
6. Description of the know-how
7. Confidentiality
8. Access to technological advances (cross-licensing)
9. Limitations of the license and anti-competitive practices
10. Territorial exclusivity
11. Permitted field of use
12. Exploitation
13. Settlement of Disputes
14. Duration of the License Contract

Question 13

What are the types of remuneration available?

Answer 13

1. Direct Money Compensation
   - lump sum
   - Royalties
   - Fees

Lump-sum payments are higher risk- higher reward for the licensee. If sales are high, the licensee earns more and pays still the same lump sum to the licensor.

Royalties may have some tax advantages.

2. Indirect Money Compensation
   - Income from related operations
   - dividends
   - cost shifting or sharing measures
   - feedback of technical information
   - acquisition of market data
   - cost reduction and savings to the licensee
   - currency of obligation
   - rate of exchange

Question 14

Which types of patent licenses exists and what are some key aspects?

Answer 14

• Patent licenses 
- exclusive 
- sole 
- simple
- non-exclusive
"most favoured licensee" clause (MFL) 

right to sue infringers is of the patent owner, and of the licensee in the case of an exclusive license, or of the licensee in case the owner is inactive.

“no challenge clause” is anti-competitive.

Question 15

How do trademark licenses work?

Answer 15

Trademarks can be licensed.
The licensor must exercise quality control over the products sold by a licensee to avoid expungement of the mark.

Some countries require that the parties submit the agreement to the Registrar for registration and examination.
Usually the submission is not essential for the validity of the trademark license, provided the licensor exerts control on the quality.

Joint Recommendation Concerning Trademark Licenses (WIPO + Paris agreement) says that a non-registered agreement can be valid if it doesn’t affect:

1. The validity of the mark
2. Any right that the licensee might have to join infringement proceedings initiated by the holder
3. The question wether use of a mark by a third person can be considered use by the trademark holder.

Provisions typical of trademark licenses are the following:

1. Permission to Use
2. Number of Licensees
3. Quality Control
4. Marketing
5. Financial Arrangements
6. Infringement

Question 16

How do Copyright Licenses work?

Answer 16

Copyright cannot be sold (moral rights).
Trademarks can be licensed (transfer of economic rights).

E.g. a published should be granted a license comprising of all the rights necessary for optimum realisation. eg.
- publish the work, translation, sequel editions
+ “subsidary rights”
- publish publication in the press, reproduction and communication to public

NOT rights that alter the integrity of the work.

Question 17

How does Government exert Control on licensing agreements?

Answer 17

In many countries, the inflow of technology is subject to a variety of controls a means of ensuring that contracts concerning transfer of technology are consistent with the economic aims of the government.

The system usually include that the agreements be notified and/or approved by government authorities.
The failure to do so may result rendering the license void, suspension of right of trade or penalties.

WIPO Model Law for developing countries on Inventions - framework to guide such provisions.
Ensures that the contract doesn’t impose unjustified restrictions on the transferee and to prevent the economy to suffer.

Question 18

How do patent policy and competition interact in promoting innovation?

Answer 18

Competition works best to achieve optimum prices, quantity and quality of goods and services for consumers.

Patent policy can also stimulate innovation by securing for a limited time to inventors the exclusive rights to their discoveries.

Competition and patent policy are not in conflict but are actually complementary.
Firms may compete in obtaining the property rights that patent convey.
Most business conduct does not unreasonably retrain or serve to monopolise markets.

Question 19

What are “grant-back” clauses?

Answer 19

When licensee has improved the patent technology, it “grants-back” to the original patentee access to the improvements.

1970s Antitrust viewed it as illegal. but has recently been seen as an incentive to promote licensing and enabling improvements.

Question 20

What are EU competition rules applicable to technology transfer agreements?

Answer 20

The Commission has defined certain categories of agreements that are unproblematic from a competition point of view, these are set out in various “Block Exemption Regulations” (BER).
If an agreement fulfils all criteria, it is exempted from prohibition.

It exempts licensing between companies with limited market power, and those where the positive effects outweigh the negative ones.

Question 21

What is forced licensing and how is it different from compulsory licensing?

Answer 21

Classical behavior of economies switching to reproduction-based to innovation-based, to avoid technology gaps.

Typical clauses of Forced Tech Transfer (Prior to the amendments):
1. Issues on ownership of improvement.
Who owns the improvement of the license technology? The party that makes the improvement, without allowing allocation of the right through a contract like in a domestic tech transfer.
2. Prohibited terms to a technology import contract, such as terms that restricts the licensee of the technology from using the improvement it develops.
3. No possibility to prohibit sub-licensing
4. A mandatory indemnification provision, i.e. obligations on foreign technology owners to indemnify (pay for damages) the beneficiary (a licensee ) against infringement risk of third party IP rights

China imposed two regulations “Administration of the Import and Export of Technology” considered “Forced Licenses”:

1. EU sues China at WTO and so does US.
2. China had to make amends to the TIER.
3. China amends its TIER rules to reduce Forced Tech Transfer.