9. Invalid IP. An IP-related agreement is, by definition, about IP rights in the form of exclusive rights to do certain acts or the right to exclude others from doing certain acts. That is, after all, the whole point of IP rights. Thus, when the parties negotiate an IP agreement, their expectations are based upon the ability to enforce such rights. What happens, however, if the licensed IP rights are later found to be invalid by a court or government agency? What happens when a potential IP right (e.g., a patent application) is licensed and it never materializes (e.g., the patent application never matures into an issued patent)? Does that lead to an automatic termination of the agreement? Or, does it simply lead to a reduction of the royalties? If automatic termination, does that then lead to a refund of past royalties already paid? In sum, the agreement should address what happens if the parties’ expectations with respect to the validity (or existence) of the licensed IP rights are not met.
10. Confidentiality. Aside from the specific IP that is the subject of the agreement, the parties are likely to (purposefully or inadvertently) share confidential information during the course of performing under the agreement (e.g., future business plans, customer lists, pricing, etc.). Thus, all IP-related agreements should contain provisions to address the treatment of the parties’ respective confidential information much like an Non-Disclosure (or Confidentiality) Agreement.
11. Assignment. The agreement should spell out when, if at all, the parties can assign or transfer the agreement to another related or unrelated entity (e.g., only in the case of the sale of the entire business, only to an affiliate, etc.)?
12. General Provisions. These provisions, which some refer to as “miscellaneous” provisions, are found in every agreement (typically at the end) and often overlooked. However, if (and when) a dispute arises with respect to the agreement, these provisions are far from unimportant. The more notable general provisions include: (a) Governing Law – which state’s or jurisdiction’s law governs the agreement? (b) Dispute Resolution – how will disputes be resolved (e.g., arbitration, mediation or litigation)? (c) Venue – where will any dispute resolution proceedings take place (e.g., your company’s home jurisdiction, the other party’s or a neutral site)? (d) Survival – which provisions of the agreement survive the termination or expiration of the agreement such that the parties “walk-away” rights are clear (e.g., right to exhaust inventory of licensed products, return of confidential materials, indemnifications, etc.).
At the end of the day, any IP-related agreement must answer the “what if this happens” questions raised by the parties’ contemplated relationship. While no agreement can answer all the “what if’s,” a properly drafted one will anticipate those that are most probable. The considerations presented in this post will help start your thinking about IP-related agreements, but do not substitute for quality legal advice that is tailored to your company’s unique situation.
