The following is a guest post by Elaine de Beer a patent attorney at Edward Nathan Sonnenbergs (ENS) – Africa’s largest law firm.  Enjoy!

 The thought of Africa may conjure up images of disease, poverty, wars, famine and downwardly progressing economies. Indeed, Africa is sometimes regarded as a dark continent attracting only those in search of precious metals and hidden gems. It is, therefore, no wonder that outsiders at times find it difficult to make a positive association between this image of Africa and the progressive intellectual property rights system actually present on the continent. With the supposed lack of infrastructure and market-awareness in Africa, there is often a perception that Africa has no role to play in the global economy and there is, therefore, no incentive for companies and multi-national organisations to enter the African marketplace to begin with.

However, the true state of affairs on this continent could not be further from the truth.

What outsiders often miss is that sub-Saharan Africa is widely considered to be the world’s second fastest growing region, after Asia with a GDP forecast of 5.8 percent for 2012, and a foreign direct investment that has increased from $9 billion in 2000 to $88 billion in 2008. In fact, the economies of Africa enjoy a GDP which increases year-on-year and there is a burgeoning middle class together with a rapidly growing technology and telecommunications sector.

In the interest of full disclosure, it should be pointed out that most African countries have very small intellectual property professions, which means that there is little or no economic incentive for any publisher to assume the financial burden of launching and selling specialist law journals, law reports and practitioners’ reference works for most of these countries. For the outsider, this generally means that information relating to the filing of a patent, an opposition to a trade mark, or a defence to an action for copyright infringement is not easy to come by.

A second problem often faced by practitioners trying to navigate the world of intellectual property protection in Africa is that there is often great difficulty in communicating – both within Africa and between Africans and the outside world. Indeed, levels of telecommunication penetration and, particularly, the lack of broadband internet access have placed greater importance on slower and less reliable communications media such as the fax and regular postal service. This means that information which, in many developed countries one simply gathers from an official website, is far more difficult to access in Africa.

As such, the apprehension regarding obtaining IP protection in Africa may stem more from the IP practitioners tasked to handle matters in Africa than from the companies themselves. This lack of information often results in progressively difficult matters, where time-consuming effort needs to be put into the completion of the simplest of tasks, with frustrating and undue delays often being the end-result.

And so, South Africa is rising to face the African challenge. Many South African law firms are strategically positioning themselves as key-role players on the continent with an impressive and growing presence in Africa.

These law firms are providing an African solution to an African problem by fostering strong relationships with key personnel at each of the African intellectual property institutions as well as local law firms in each of the African countries. In addition, they have built up expert knowledge on the inner-workings of the local and regional intellectual property systems in Africa.

This enables them to obtain information on intellectual property matters with minimal effort and no undue delays.

From an intellectual property perspective, clients seeking to do business on the African continent can rely on their trusted advisor in the form of a leading South African legal firm that has an in-depth knowledge and understanding of the laws, practices, customs and procedures in each African region, as opposed to having to seek and develop a new advisory relationship in each territory.

In conclusion, it should be borne in mind that Africa is expected to continue enjoying substantial economic growth and increased economic activity, and as such, obtaining intellectual property protection and maintaining and enforcing these rights should be at the top of any checklist of a company seeking to obtain a dominant position in today’s global economy. This is where South African law firms have a key role to play and are coming into their own quite remarkably.

Many of my small- and medium-sized enterprise (SME) clients who have filed U.S. trademark applications have been contacting me lately about “invoices” they have received in the mail.  All of these official-looking “invoices,” however, have turned about to be scams.

Trademark-related solicitation (“trademark spam,” if you will) has become an increasing concern of the US Patent and Trademark Office (USPTO).  In fact, the USPTO added a warning notice last month to its trademarks homepage.  Why is this happening?  Well, the USPTO’s databases are public.  Thus, solicitors have been using trademark registration and application data to send letters and emails to applicants offering phony legal and registration services.  In order to fool even the most spam-conscious applicants, such solicitors adopt corporate names that include “United States” or “U.S.” in an attempt to fool their targets.  Unlike the spam we are all accustomed to, however, trademark spammers format their misleading messages to resemble official government notices.  With an emphasis on application data and filing dates instead of a smiling monkey and congratulatory balloons, many trademark applicants are paying the requested fees before realizing they are being scammed.

What do you do?  Read all your mail and emails carefully.  Be especially wary of those that ask for money.  All official USPTO mail will be sent from Alexandria, Virginia, and emails will be sent from the “uspto.gov” domain.  If you do mistakenly fall victim to trademark spam, file a report with the Federal Trade Commission at www.FTC.gov.  The USPTO would also like to hear about such trickery.  Thus, also send an email to TMfeedback@uspto.gov detailing the spammer and whether the requested fees were paid for the phony, offered legal and registration services.

A global museum of such scam notices (both patent and trademark) can be found here.  Stay vigilant!

As I have often pointed out on this Blog, small- and medium-sized enterprises (SMEs) that overlook their intellectual property assets (i.e.,“IP” or patents, copyrights, trademarks and trade secrets) do so at their own peril.  As IP accounts for a vast majority of SMEs’ value, the key to their exit strategy – be it an IPO or sale – is the IP that they control or potentially control.

Last month, the World Intellectual Property Organization (WIPO) released its annual report of IP statistics from around the world.  While there is most certainly a dizzying amount of data, I’ve taken the liberty to provide a snapshot of such data to help SMEs (and those who counsel them) understand what is happening in the world around them.  This should help in making long-term, non-myopic IP management decisions.

With over 3 million worldwide applications in 2009, trademark protection is the most sought after form of IP protection in the world.  That is, trademark applications represent the highest percentage of overall IP protection applications, apart from a few exceptions such as the IP offices of Japan, the Republic of Korea, and U.S.  where patent applications make up the largest share.

Globally, residents file the majority of their IP applications at their respective IP offices.  This reflects a preference for seeking protection within respective domestic markets.  For example, 42.7% of global patent applications were filed abroad.  This shows that patent applicants have a greater appetite for seeking international protection for this form of IP than for any other form of IP rights.  By contrast, only 25% of total trademark applications are filed by applicants outside their country.

With respect to patent filings abroad in 2009, applicants choose the Patent Cooperation Treaty National Phase Entry route 53.4% of the time, versus directly filing in a foreign jurisdiction.

The world’s top 10 IP offices accounted for approximately 87% of total patent applications filed globally, with the top 3 – the U.S., Japan and China – filing about 60% of the total. Together, the top 20 offices filed 94% of all patent applications.

Between 2008 and 2009, of the top 3 offices, there was a 10.8% decrease in the number of patent applications filed in Japan, while the U.S. remained practically unchanged and China saw an 8.5% increase in the number of applications.

In 2009, one quarter of all trademark applications were filed at the Chinese Trademark Office. When combined with the shares held by India, Korea and Japan, these four Asian offices accounted for 37% of world’s total number of trademark applications.

It has now been three years since an article entitled “Meet the Middlemen” was authored by Ron Laurie and me, and published in the February/March 2008 issue of Intellectual Asset Management (IAM) Magazine.  In that often-cited article, Ron and I presented a new taxonomy comprised of seventeen IP business models in the United States IP marketplace.  Although, admittedly, the taxonomy we presented was not perfect, we did feel that it adequately described what we observed as the rise of intermediary business models in the marketplace.  The taxonomy included “IP middlemen” such as: Licensing Agents, IP Brokers, IP-Based M&A Advisors, IP Auction Houses, On-Line IP/Technology Exchanges, and University Technology Transfer Intermediaries. 

Individual inventors and corporate IP owners are used to dealing with Accountants, Lawyers and Investment Advisors – all professionals who are governed by federal and/or state professional regulations, as well as national association guidelines.  Well, the question I now pose is: What professional and ethical regulations govern the conduct of these IP middlemen?  The short answer is “none!”  After all, there is no IP brokerage governing body.  The USPTO has bigger problems.  That is, individual inventors and corporate IP owners should not feel at ease because the invention promotion industry has been the focus of an anti-scam, public awareness campaign by the USPTO.  This campaign is not aimed at the IP middlemen covered by Ron and I’s taxonomy.

Further, we should all realize that IP rights are not “securities” subject to state and federal regulations.  Lastly, we all know that all states’ bar associations regulate attorney conduct regardless of whether the attorney is actually “practicing law.”  An informal survey I conducted, however, suggests the amount of IP middlemen who are attorneys is less than 20% – the remaining personnel have business, financial and engineering backgrounds. 

Interestingly, earlier this year, the British Standards Institution (BSI) – the UK’s National Standards Body – released standard BS 8538:2011, entitled “Specification For The Provision Of Services Relating to the Commercialization of Intellectual Property Rights.”  The standard aims to “set[] out for the first time good practice and principles of ethical behaviour for organizations providing services to inventors.”  The British Standard specifies middlemen ethical behavior principles relating to: integrity and competence; transparency regarding fees, costs and finances; confidentiality and the disclosure of information; the declaration of conflicts of interest; and complaint handling.  It also specifies a process for service provision, covering: (1) initial engagement; (2) NDAs; and (3) evaluation of the IP; and (4) commercial agreements for the provision of advice and/or services.[1]

Also intersting is that the IP Office of Singapore (IPOS), in July of this year, launched an IP Competency Framework (IPCF) initiative that will promulgate standards for IP professionals. More specifically, it will “define the competencies required for key IP professionals and practitioners in the industry and accredit the attainment of these competencies into Continuing Professional Development qualifications that are recognised by the industry.”  IPOS claims that the IPCF is “the first of its kind in the world on a nationwide scale.”  Under the Framework, four key IP occupational levels have been identified, with fifty-seven competency units initially created.  These will be developed and validated into standards with key industry experts from the IP services sector, academia, and the legal profession over the next three years. IPOS will also accredit training providers who would certify successful program participants.

So, will a U.S. body follow the lead of the UK and Singapore?  Maybe the USA chapter of the Licensing Executives Society (LES)?  We’ll see who steps up to the plate!

The leaders from eight of the world’s richest industrialized countries (commonly known as the “Group of Eight” or “G8”) – Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States – met in Deauville, France from May 27-28, 2011.  This forum, which traditionally discusses issues of mutual or global concern, was the 37^th formal G8 meeting since its founding in 1975.  Interestingly, at the conclusion of the meeting, the G8 leaders issued a joint final statement entitled: G8 Declaration Renewed Commitment for Freedom and Democracy. Among many other things, the G8 leaders’ 23-page, final statement called for better protection of intellectual property around the world.  More specifically, the following six paragraphs relating to IP were the most interesting:

• “In Deauville in 2011, for the first time at Leaders’ level, we agreed, in the presence of some leaders of the Internet economy, on a number of key principles, including freedom, respect for privacy and intellectual property, … that underpin a strong and flourishing Internet.”

• “The Internet has become a major driver for the global economy, its growth and innovation. The openness, transparency and freedom of the Internet have been key to its development and success. These principles, together with those of non-discrimination and fair competition, must continue to be an essential force behind its development. Their implementation must be included in a broader framework: that of respect for the rule of law, human rights and fundamental freedoms, the protection of intellectual property rights, which inspire life in every democratic society for the benefit of all citizens.”

• “The global digital economy has served as a powerful economic driver and engine of growth and innovation. … As we adopt more innovative Internet-based services, we face challenges in promoting interoperability and convergence among our public policies on issues such as the protection of personal data, net neutrality, transborder data flow, ICT security, and intellectual property.”

• “With regard to the protection of intellectual property, in particular copyright, trademarks, trade secrets and patents, we recognize the need to have national laws and frameworks for improved enforcement. We are thus renewing our commitment to ensuring effective action against violations of intellectual property rights in the digital arena, including action that addresses present and future infringements. We recognize that the effective implementation of intellectual property rules requires suitable international cooperation of relevant stakeholders, including with the private sector. We are committed to identifying ways of facilitating greater access and openness to knowledge, education and culture, including by encouraging continued innovation in legal on line trade in goods and content, that are respectful of intellectual property rights.”

• “We agree on the necessity of a level playing field in the innovation area, including a strong and robust intellectual property system as an incentive to innovation and a catalyst for growth. We acknowledge the important role of the World Intellectual Property Organization (WIPO) in developing a broad approach to intellectual property in support of business friendly, robust and efficient national intellectual property systems. Renewing our support to the principles of the patent system, we attach great importance to its promotion and development. We encourage increased international action to strengthen patent quality, and call for improved diffusion of patent information, particularly critical for SMEs and research centres. We support transparency in technology markets and call for the improvement of market places for trading rights. We invite WIPO, in close cooperation with Member States and other relevant entities, to intensify its work in these three areas. In addition we note the importance of enforcement in order to incentivise innovation and protect innovation once developed.”

• “We welcome the Patent Pool Initiative launched by UNITAID in order to facilitate the production of affordable generic medicines well-adapted for use in resource-poor settings, and we encourage the voluntary participation of patent owners, private and public, in the project.”

I have previously discussed that it is clear to me that the economic downturn has lessened the appetite for companies to spend money on anything not perceived as a “necessary business expense.”  The importance of intellectual property (IP) rights in a 21^st century, knowledge economy, however, dictates that individual inventors and small- and medium-sized enterprises (“SMEs”) find capital to file for patents and trademarks relating to their truly innovative products and services.

The above then begs the question:  How can SMEs save money in hiring and engaging IP legal counsel?  Well, the answer to this question contains many variables related to the specific IP attorney being hired.  Such variables include the region where the IP attorney works (i.e., Northeast rates may be more expensive that other regions such as the Southwest), the size of law firm in which they practice (i.e., a lower-priced solo shop, versus a more expensive small firm, versus an even more expensive large firm), their level of experience (i.e., a junior attorney with a modest hourly rate versus a senior partner with a higher billing rate), the complexity of the IP involved (e.g., a relatively simple mechanical patent application may take less hours to craft than a more complex pharmaceutical composition patent application), etc.

The above variables aside, there is one constant in the price equation that I consistently advise SMEs to pay attention to – the preparation of their disclosure materials BEFORE meeting with any newly-engaged IP counsel.  That is, SMEs (and individual entrepreneurs) can directly and significantly control (i.e., reduce) their IP legal cost through careful preparation of their disclosure materials.  I have seen $5000 legal bills turned into $15000 legal bills through the needless “back and forth” between an IP attorney who is “on the clock” and a client who has prematurely engaged such IP attorney.

So, what do I mean by disclosure materials and how should an SME prepare them?  Well, I answer in two parts:

With respect to an invention needing a patent application, disclosure materials means an SME gathering and organizing all relevant papers, sketches, drawings, notes, software code, formulations, etc. that provide the IP attorney with the following information:

o   Title of the invention

o   The full legal names, addresses and citizenship of all inventors

o   The full name, address and state of incorporation of the company who will own the patent (if any)

o   A description of the problem solved by the invention

o   A description of how long the problem has been around and how have others tried to solve the problem

o   A description of how the invention solves the problem differently than past solutions or attempted solutions

o   System diagrams showing all hardware/software components of the invention

o   Flowcharts illustrating the steps of the invention

o   A list any known Web sites, publications, patents, products, services, etc. that are relevant to the subject matter of the invention

o   A description of how the invention relates to the launch of a new product or service

o   Dates the invention was (or will be): first conceived; implemented as a pilot or otherwise used in the public domain; reduced to actual practice; the subject of a publication or public disclosure; sold or offered for sale; and/or internally exploited

With respect to a mark or logo needing a trademark application, disclosure materials means an SME gathering and organizing the following information to provide to the IP attorney:

o   A description of the mark

o   The full name, address and state of incorporation of the entity who will own the trademark

o   A description of all the types of products and/or services with which the mark is actually used or will be used

o   Date of any first sale of goods bearing the mark in interstate commerce

o   Copies of any specimens showing the mark as it is currently (or will be) used on or in connection with the goods or services

o   A description of how the mark is actually used or intended to be used

In sum, a prepared and organized client is a happy client (i.e., one who receives efficient IP legal services and a reasonable legal bill from their IP attorney, and is consequently glad to pay that reasonable bill)!

It is an obvious fact that the ability to raise capital is vital to many small (especially “high-tech”) businesses. In doing so, small business founders and other entrepreneurs spend a significant amount of time drafting a business plan and toiling with presentation slides. Those plans invariably define a market, describe the new service or product offering and detail the biographies of the management team. However, rarely do entrepreneurs think of stating their business case to potential investors in terms of the intellectual property (IP) rights (i.e., the patents, copyrights, trademarks and/or trade secrets) their new company controls or potentially can control.

Why should a small company care about IP?  Well, in the last thirty years, there has been a shift from a labor economy to a knowledge economy. That is, less than 10% of Americans now work in manufacturing. Consequently, intangible assets (i.e., long-lived assets used in the production of goods and services, including IP rights, know-how, software, databases, and certain contractual rights such as broadcast licenses, governmental permits, customer and supplier agreements, etc.) have emerged as the most powerful asset class, overtaking more traditional capital assets such as real property, plant and equipment. Studies have shown that as much as 75% of the value of a U.S. publicly-traded company comes from intangible assets. This is an inversion from 30 years ago when less than 20 percent of a company’s value came from intangible assets, and is significant because the largest component (or subset) of intangibles is IP.

So again, “What does IP have to do with me the small company entrepreneur raising capital!?”  Well, the lifeblood of any small, high-technology enterprise is the IP that it controls or potentially controls. In other words, the short-term salability, the long-term profitability, and the eventual ability to undertake an initial public offering of the small company all depend upon its ability to develop, acquire, protect and apply innovative ideas and concepts. The foregoing is supported by data showing that small businesses generate 13-14 times more patents per employee than large firms (and would empirically suggest that this tangible asset versus intangible asset inversion described above applies, if not more so, to smaller (and private) companies as well).

Thus, when an entrepreneur is spending a significant amount of time drafting a business plan and toiling with presentation slides in the hopes of raising capital, it would be prudent to ask: “What is my IP position and have I conveyed that in my materials such that a professional investor will understand?”  In other words, as an entrepreneur, you would not have started a company if you didn’t have a great idea about making some new product, offering a new service, or making some existing product or service faster, slower, cheaper, bigger, smaller or whatever adjective applies for describing the next “cool thing” in your technology space. Well, how do you keep competitors (think bigger, more-established companies) from just copying that idea!? The answer is IP rights!

Therefore, your business plan and pitch book should address the following:  What patent applications will we file?  What will we keep secret?  What will be open sourced?  What trademark applications will we file?  Have we obtained domain name registrations corresponding to the trademark applications we filed?  Does our business model depend on using someone else’s materials that are protected by copyright or some other form of IP?  Your plan and pitch books should address these because without any plan for establishing (or any established) IP rights, your venture essentially becomes a commodity provider attempting to compete on price – which is difficult given that you most likely won’t be able to take advantage of any economies of scale, unlike your more mature and larger competitors.

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.

5. Obligations.  In order for the parties to be happy during the course of performance under the agreement, each party must tailor their behavior to conform to the other party’s expectations.  Thus, besides the transfer of IP rights, the agreement must clearly set forth the respective obligations of the parties so that no side becomes disappointed with the other side’s behavior.  Such expected behaviors include the obligation to: keep certain records, give written notice of certain events, prepare reports, obtain regulatory approval, purchase insurance, perform certain R&D, provide and update data, provide technical assistance, pay government fees such as taxes and IP-related maintenance, renewal and annuity fees, enforce the licensed IP rights against third-party infringers, mark products with certain IP-ownership notices, etc.

6. Dates.  It is important that the agreement clearly sets forth all dates (e.g., the effective date, expiration date, etc.) and time periods (with clear triggering events) for each party’s respective obligations (e.g., deadlines for making payments and delivering royalty reports, data, prototypes, etc.).

7. Newly-Created IP.  While the agreement should obviously specify the parties respective rights to existing IP, the allocation of rights to future IP that may be created during the course of performance under the agreement is often overlooked.  That is, the licensed IP may be modified, enhanced, improved and/or derivative works created therefrom by the licensor and/or the licensee.  Who owns such new IP?  Are they automatically included in the original license grant or does that trigger the need for additional compensation or negotiations?  Further – especially when such new IP is jointly created by the parties – who pays for and controls decisions regarding securing IP protection and who is responsible for enforcing such new IP?  Jointly owning newly-created IP sounds like a fair and simple solution to the issues raised by these questions.  However, what happens when the relationship sours (i.e., the agreement terminates) or runs its course (i.e., the agreement expires)?  The IP is still jointly owned and the parties’ fate with respect to licensing and enforcing the IP is still tied to each other.  Therefore, when negotiating the term sheet, don’t let the concentration on the existing IP that is driving the deal be accompanied by a neglect of future IP.  They both should be addressed, especially given the fact that newly-created IP can sometimes turn out to be more valuable than the IP existing at the time the agreement was first entered into.

8. Indemnifications.  If the licensee makes a product using the licensor’s IP which turns out to be defective, who’s responsible for any product liability or personal injury claims?  Does the answer change if the licensee modified the IP in the process of producing the defective product?  What if the licensed IP infringes a third party’s IP?  What if a third party sues because one of the parties to the agreement fails to perform one or more of its obligations?  The agreement must allocate these risks in terms of indemnifications (i.e., where one party holds the other party “harmless” and agrees to pay for all court costs, attorneys’ fees and judgments for certain types of claims).  Even if one party agrees to indemnify the other party, who controls the defense strategy and who decides when to settle?  Simply put, your agreement must address these questions.

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.

1. Recitals.  Often overlooked and underdeveloped, the recitals (i.e., the “Whereas” statements that begin most agreements) should “set the stage” for a third-party reader of the agreement.  Generally speaking, in a later dispute, the recitals are presumed to be true statements held against both parties.  Thus, the recitals should tell the story about how the parties got here.  They should reference what technology, funding, personnel and/or other resources and capabilities each party brings to the table.  The recitals should also reference any other agreements between the parties (e.g., an earlier confidentiality or funding agreement) which are now amended or rendered void.

2. Definitions.  There is no more important task in drafting an agreement than defining the (capitalized) terms which will be used throughout the agreement.  That is, the definition section is the skeleton of the agreement upon which the business terms and conditions of the term sheet can be fleshed out.  Thus, such terms as “Licensed Product,” “Field,” “Licensed Services,” “Net Revenue,” “Territory,” “Licensed IP,” “New IP,” “License,” “Party A’s IP” and “Party B’s IP” must be precisely and accurately defined.  In sum, the definitions section, like the rest of the agreement as a whole, must strive for clarity and be the basis for each party’s (realistic) expectations of the other.

3. License Grants.The heart of any IP-related agreement is the precise description of exactly what IP is licensed to whom, under what conditions (e.g., only after regulatory approval or receiving a next round of financing), under what restrictions, for how long, for what purposes, exclusively or non-exclusively, and with or without sublicense rights.

4. Royalties.  The agreement must specify the type (and amount) of consideration for any IP license grants.  Such consideration can be monetary or non-monetary, and includes: a one-time fee, royalty payments based on net or gross revenue, options, access to licensee’s IP, development of complimentary IP, equity position, or any combination of these.  The refundability and any minimums with respect to royalties should also be specified.

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.

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