exclusive licences

An exclusive licence, granted by a licensor, is one whereby the licensee is authorised to perform some activity in respect to property to the exclusion of all others. In the context of intellectual property, only the owner has the right to grant a licence which may be granted through its agent. Limited statutory exceptions do exist. Exclusive licenses should be contrasted with non-exclusive and sole licenses. A person granted an exclusive licence to distribute a product within a named territory (say England) is entitled to distribute the product in England to the exclusion of all others, including the owner of the rights licensed. Accordingly, if the owner of (say intellectual property) rights was to grant a further licence to another person, the owner would more than likely place itself in breach of contract and indeed infringe the rights of the exclusive licensee. On the other hand, an owner of IP rights is entitled to grant non-exclusive licenses as it sees fit, to as many persons as it wishes without compromising its own position.

Flexibility of Licences

A licence may be for a fixed or variable term, or a combination of both. In addition to this, a licence which is exclusive may be structured so as to take advantage of the flexibility of licensing regimes. Extending the example of above, an exclusive licensor may chose to grant exclusive rights to distribute to different businesses in each of England, Wales and Scotland. In this way the exclusivity for each licensee is maintained.

After a licence has expired or terminated, the licensee will no longer be entitled to use or deal with the property rights.

Termination

There are usually formal requirements for granting an exclusive licence. For instance in the case of an exclusive copyright licenses, the Copyright Designs and Patents Act requires that such licences are made in writing, signed by the licensor or on its behalf (which would be its agent). Exclusive licensees also may be granted elevated rights by statute. The Act permits an exclusive licensee to commence proceedings for infringement of intellectual property rights taking place after exclusivity is granted, as if transaction was an assignment; it also has the same rights and remedies against infringers as the owner of copyright, which are concurrent with the rights of the owner.

Structuring of Licences

Granting exclusivity creates natural tension between the licensee and licensor. The licensee will almost always wish to be licensed in broad terms; a licensor is typically in the diametrically opposite position where it wishes to grant the narrowest licence possible. There are good arguments to assert that the licence ought to be as broad as the capacity of the licensee allow - and no more - to facilitate the commercial requirements to allow the parties to the transaction to use or deal with the relevant property rights to meet the agreed commercial ends. Putting aside statutory requirements to grant exclusivity, reducing agreements to use property to writing mitigates the scope and extent of disputes if or when they arise. Indeed, the absence of writing can render an otherwise good claim so difficult to pursue that it is not worthwhile doing so.

A person granting an exclusive licence should be careful to ensure that the rights they grant do not conflict with earlier rights that may have been granted by the licensor. If prior contracts grant rights to the relevant property, it is more than likely that the licensor will place itself in breach of contract with the previous licensees and the person to whom exclusivity was purported granted. This results to breach of two contracts rather than just one and exposes the licensor to at least two legal claims for breach of contract and probably infringement.

Where applicable, parties to contracts granting licences should cast their minds to ownership of new material created during the course of the licence. Spin-off technologies or materials may be created, or indeed purposefully created during the course of the licence. The ownership of the rights in these materials should be made crystal clear in the agreement, as well as any data which may be produced in the course of the contract. In addition to this, the licensor would be prudent to consider any limitations of use in the permission granted, such as restrictions in the industries that the subject matter may be used.

Sublicensing rights (i.e. to a third party) granted as part of the licence agreement should also be considered, and specified if it is to be permitted by the licensor.

Exclusive licenses grant special rights, such as standing to sue for intellectual property rights infringement without relying on the intellectual property rights owner. Such licences are usually granted expressly by contract, however they may be implied into oral agreements and the conduct of the parties.