Intellectual Property Attorney

The Unfortunate Phases Often Followed In Developing A Licensing Agreement

Even with our own clients, whom we caution against blind use of checklist composed agreements or “boilerplate” form agreements, we are not always immediately successful in getting them to work with us in developing and using a good licensing agreement. Over the years, we have found that our clients often go through phases in developing a license agreement that they are comfortable with:

Phase 1 is when they first come to us and we work with them to develop an agreement that suits their licensing program’s needs. We tell clients that each situation is different and that we need to work with them to develop an agreement that meets their special needs. We also try to educate them as to the intent of each clause. Unfortunately, more often than not, clients assure us that they are familiar with licensing and ask us to send them a license agreement we draft based on the limited information they provide. They then go out into their industry, armed with that agreement, to line up licensees.

Phase 2 is when they encounter questions from prospective contracting parties which they cannot readily answer, because they are not yet comfortable with the license agreement and all its terms. At this point they come back and ask us if we can’t eliminate the “sticking points” from the agreement. In general, they want it shorter. As a rule, our agreements probably contain less legalese and more plain English than most. Nevertheless, sometimes despite our protests, clients will insist upon changes (i.e., shortening, often wholesale deletion, of clauses).

Phase 3 is when the clients who have concluded licenses based on the Phase 2 ”revised” agreement encounter problems, problems which would have been handled by their license agreement had revisions not been made. Unfortunately, because of the revisions, the problems have to be worked out without the benefit of preset terms – often in a manner unsatisfactory to the clients.

Phase 4 is when the clients, now fully immersed in licensing and rather sophisticated as to all its nuances, recognize the importance of a thorough license agreement. So they come back to us and together we work out a final agreement that is both all-encompassing and fully understood and every clause of which they are prepared to fight for in their negotiations. Quite frankly, there are times during this fourth phase when we almost have role reversal because we find that we need to restrain clients so that they are not so adamant and pedantic about a particular clause or its wording that they become what attorneys are often accused of being: “deal-killers.”

Phase 5 is when the client realizes and accepts that each licensing situation is unique, and must be approached as such. When they understand that checklists and ”boilerplate” agreements are only starting points, and that knowledgeable legal counsel can assist in determining what clauses can be revised and even deleted and what appropriate additional clauses can be constructed that will allow them to confidently go forward with a licensing arrangement that will fully protect their legal interests.

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