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Legal conditions to consider in a License Agreement

By Bhavneet Vohra July 29, 2016


Introduction

The license agreement is a medium which allows the holder (Licensor) to earn money and make favourable returns from his property (it also includes inventions or and any literary or creative work) by giving it out to a user (Licensee) for its usage. It also grants protection in terms of proprietary rights by giving access and permission to use the product or property for a particular specific use.

Before moving on to the elements that must be included in the LICENSE AGREEMENT, so that the rights of the proprietor are not exploited by the user, we need to first learn about some basic concepts related to the agreements which are as follows:

What is a License?

In a layman language, License is basically a grant or permission by the owner of the property or product to use the product for a charge.

As per Indian Law the term “License” is defined by the Section 52 of the Indian Easement Act, 1882. According to this section, only permission is granted for a particular act or use on an immovable property, and not an easement or interest.

But License can also be obtained in terms of Intellectual Property Rights.

Who are the Parties to a License Agreement?

There are basically two parties in a License Agreement which are as follows:

Licensor: In a layman language, licensor is the holder or the owner of the property.

Licensee: The party to whom the license is granted for a charge and for usage.

This means that the Licensee will only be given limited rights like right to use, right to enjoy etc. that the Licensor deems fit while the ownership still lies with the Licensor. The Intellectual Property rights still continue to vest with the Licensor. Any improvement or modification that is made while usage should pass on to the Licensor only.

In India, commonly the License Agreements is made majorly in terms for the Immovable Property and Intellectual Property Rights which includes Copyrights, Patents and Trademarks.

Since above we have covered the basic concepts related to the License Agreements we can now move forward to the Essential Elements that need to be included in the Agreement.

What are the Things we need to look out while drafting a License Agreement?

Different types of Agreements require different elements as per the product.

  1. Licensed Product/Property: The agreement must specify the product with the full description  which is to be included in the Agreement, some of which are:
  • Immovable Property- Section 52 of the Indian Easement Act.
  • Trademarks- Section 49 of the Trademark Act, 1999 lays down the procedure for the licensing of the Trademark.
  • Patents- Section 70 of the Patents Act, 1970 gives power to the patentee to grant licenses. Section 84 specifies the areas where Compulsory Licensing is required.
  • Copyrights: Voluntary Licensing can be done as there is no specific section specifying the same in the Indian Copyrights Act, 1957.
  1. Privity- This specifies the relation between the Licensor or Granter and Licensee. Each party shall be solely responsible for compliance with all applicable laws, decrees, regulations or orders affecting its agents, representatives, employees or workers.
  2. Territory- The Agreement must also specify the territory in which the Licensee has authority to use the Product and is not allowed to go beyond the specified territory for usage.
  3. Terms of use- The Licensor must specify the terms and conditions for usage of the product which can be different for different property or product. The Terms should be such which are capable of protecting the Owner.
  4. License Fee and Cost- The Agreement also includes the Fee and Cost for Licensing which can be decided by taking many factors into consideration and varies accordingly for different agreements.
  5. Indemnity- It should also contain a clause that the Licensee should indemnify the Licensor for all the losses or damages suffered or costs or expenses incurred, by the Owner (Licensor) on account of any deliberate breach, failure or delay on the part of the Licensee.
  6. Term (Duration)- The agreement of license is for a particular term. So the agreement must specify the termination and commencement date.
  7. Non Disclosure of Confidential Information- The Licensee needs to ensure that no sensitive data, notes, instructions related to the owner of the Property is disclosed.
  8. Prohibited Uses-Apart from specifying the particular use which is granted, the owner should also specifically mention the uses of the Property which are strictly prohibited.
  9. Governing law and Dispute Resolution- The law governing the product that is licensed should also be mentioned along with the procedure to resolute in case of a dispute between the parties related to the clauses in the agreement.
  10. Marketing and Support- The Licensee should ensure and follow all the possible steps to market and support the product. Attractive and appropriate facilities should be maintained.
  11. Termination- Every agreement must contain a termination clause that may vary as per the different agreements. It should specify the obligations that must be fulfilled by the Licensee before the termination like making of payments etc.
  12. Warranty- This clause varies according to the product and it depends on the discretion of the owner whether he wants to give warranty for its product or property or not.
  13. License Restrictions: This basically includes the commercial and prior licensee’s rights and also the territory and the field.
  14. Notices- It mentions the handling, payments of notice that are to be made and received.
  15. Modifications- Specifies the form of amendments of the Agreements, whether oral or written.
  16. Force Majeure- This is basically a French term meaning “greater force”. This basically means the circumstances which beyond the control of both the Licensor and Licensee.

Apart from the above mentioned clauses in the License Agreements there can be some more clauses also which can basically vary from one contract to another, these include:

Transfer and Sub-License Rights, Covenants of the licensee, Schedule etc.

Conclusion

Licensing agreements needs extra attention and review as they provide us with many benefits which can be commercial and personal. Moreover, it should also satisfy all the laws and provisions that can be applied to the same and should not be contradictory to the same.

Sources:

http://intellectual-property.lawyers.com/intellectual-property-licensing/licensing-agreements.html

http://www.iphandbook.org/handbook/ch11/p11/

Bhavneet Singh Vohra

Vivekananda Institute of Professional Studies

Tags: agreements , license , permits , licensor , licensee , Indian Contract Act


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