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Author Topic: Licensing question  (Read 2807 times)

presa

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Licensing question
« on: 06-08-10 at 08:09 pm »

I see/hear a lot of conflict on this one elsewhere and would really appreciate some clarification.

Suppose, in a contract for the sale of a complex piece of hardware (good), foreground intellectual property is to be owned by the buyer.  In what follows, seller wishes to sell to other companies. 
Question(s): can seller sell the same product, whether modified or not, to other companies, or is business now restricted to the buyer on the basis of the foreground intellectual property ownership?  Even assuming seller was granted a licence back, how would seller be able to enter into other commercial transactions, without ownership of the foreground?  I understand that a broad commercial licence may be possible, but wouldn't one need ownership of the foreground content? 

The usual manner would involve the seller retaining foreground, with a non-exclusive licence of some sort in buyer, which would allow business with other customers.  It's the other scenario that is now confusing to me.
« Last Edit: 06-08-10 at 08:10 pm by presa »
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JSonnabend

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Re: Licensing question
« Reply #1 on: 06-09-10 at 06:36 am »

I don't know what "foreground intellectual property" is.

What the licensor can and can't do after granting the license depends on the scope of the license granted.

- Jeff
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presa

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Re: Licensing question
« Reply #2 on: 06-09-10 at 08:30 am »

Jeff,

Clarifying - 'background' is preexisting intellectual property, prior to a contract; 'foreground' is that which stems from the contract, broadly speaking.

Even with a broad commercial license, is this sufficient to enter into other business?  Suppose future customers require a license in the IP; without ownership of the foreground, how can these be granted?
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JSonnabend

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Re: Licensing question
« Reply #3 on: 06-09-10 at 08:55 am »

Presa, I have no idea what you are asking.

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presa

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Re: Licensing question
« Reply #4 on: 06-09-10 at 10:30 am »

My apologies.

Suppose X licenses IP to Y.  So, then, if the license grant so specifies, Y can use it commercially, make derivatives, etc., correct?  If W then wants to license this same IP from Y, and this is not mentioned in the scope of the license grant from X to Y, is this possible?  As X has ownership of this IP, X may freely license as it chooses; but Y, cannot, unless the grant so specifies, correct? 
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klaviernista

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Re: Licensing question
« Reply #5 on: 06-09-10 at 10:33 am »

Let me see if I can parse this through.

There is some existing IP:  "background IP"

One of the parties (buyer or seller) presently own the "background IP."

Through some mechanism, either the buyer is licensing the "background IP" to the seller, or vice versa.  Somewhere in that mechanism, the seller retains the right to sell a complex piece of hardware ("goods"), which likely incorporates the background IP.

As part of the deal, the buyer retains ownership rights to any "new" inventions ("foreground IP") developed on "the background IP" the buyer owns or "new" inventions (foreground IP) the buyer develops based on "the background IP it has in-licensed."  

The OP is asking how the buyer's ownership of the "new" inventions impacts the ability of the seller to sell the "goods," in two scenarios: 1) where the buyer has not "granted back" certain rights in the foreground IP to the seller (e.g., the right to sell goods comprising foreground IP); and 2) where the buyer HAS granted back certain rights to the seller (e.g., the right to sell goods comprising foreground IP) .

OP, did I get that right?  There is no point in anyone here replying if we can't understand the situation.  If I got it wrong, could you reduce the scenario you are asking about to a concrete hypothetical?

EDIT:  OP beat me to the punch
« Last Edit: 06-09-10 at 10:50 am by klaviernista »
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klaviernista

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Re: Licensing question
« Reply #6 on: 06-09-10 at 10:39 am »

My apologies.

Suppose X licenses IP to Y.  So, then, if the license grant so specifies, Y can use it commercially, make derivatives, etc., correct?  If W then wants to license this same IP from Y, and this is not mentioned in the scope of the license grant from X to Y, is this possible?  As X has ownership of this IP, X may freely license as it chooses; but Y, cannot, unless the grant so specifies, correct? 

The right of Y to "sublicense" or "alienate" (i.e., "transfer") Y's licensed rights to W should be spelled out in the initial license to Y.  If not, whether or not the Y can sublicense or alienate is a contract issue governed by state law (I'm assuming X&Y are in the US).  If X and Y can't agree, the contract may require court interpretation or arbitration.  The license from X to Y may also be voidable, if Y's right to alienate or sublicense the technology is a material element of the contract and X and Y were both mistaken about what was being transferred.

Note:  whether or not the license to Y is "exclusive" or "non-exclusive" may be irrelevant to the issue of transferability of the rights granted under the license (alienation/assignment), or the right to sublicense. 
« Last Edit: 06-09-10 at 10:53 am by klaviernista »
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klaviernista

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Re: Licensing question
« Reply #7 on: 06-09-10 at 10:52 am »

If W then wants to license this same IP from Y, and this is not mentioned in the scope of the license grant from X to Y, is this possible?  As X has ownership of this IP, X may freely license as it chooses; but Y, cannot, unless the grant so specifies, correct? 

By "this same IP," are you refering to the "derivatives" developed by Y, or the "IP" Y licensed from X?
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blakesq

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Re: Licensing question
« Reply #8 on: 06-09-10 at 10:57 am »

It depends on whether the licensing agreement is for an exclusive license, or non-exclusive license.  If it is an exclusive license, then X cannot license the same IP to W.  If it is a non-exclusive license, then presumably X can license to W, it all depends on the wording of the agreement. 

My apologies.

Suppose X licenses IP to Y.  So, then, if the license grant so specifies, Y can use it commercially, make derivatives, etc., correct?  If W then wants to license this same IP from Y, and this is not mentioned in the scope of the license grant from X to Y, is this possible?  As X has ownership of this IP, X may freely license as it chooses; but Y, cannot, unless the grant so specifies, correct? 
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presa

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Re: Licensing question
« Reply #9 on: 06-09-10 at 08:31 pm »

Many thanks for the replies.

Klav - 'same IP' as in IP that Y licensed from X.

So, following my hypothetical, if the license back to Y failed to express scope to engage other customers of Y, this business would be precluded, correct?  Best approach would be to carefully word the grant, making it as broad (and commercial, in purpose) as possible, correct?   

I guess my confusion is with the license back to Y actually having the power to enable business with future customers, without ownership of the IP in question driving that. 

These responses are helping though, thank you.

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klaviernista

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Re: Licensing question
« Reply #10 on: 06-10-10 at 05:52 am »

So, following my hypothetical, if the license back to Y failed to express scope to engage other customers of Y, this business would be precluded, correct?  Best approach would be to carefully word the grant, making it as broad (and commercial, in purpose) as possible, correct?   

I guess my confusion is with the license back to Y actually having the power to enable business with future customers, without ownership of the IP in question driving that. 

These responses are helping though, thank you.

What "license back to Y?"

In any event, X and Y can negotiatiate whether sublicensing rights will be included in the initial license to Y.  Typically, sublicensing rights are not included in non-exclusive licenses, because the licensor doesn't want his licensee's intruding into the market for the licensor's licenses (say that five times fast).  On the other hand, exclusive licenses often (but not in all cases) do include sublicensing rights.

As to what the default rule is, I am not certain.   Just about every license I have seen/negotiated addresses sublicensing rights.  the rule/proceudre might differ by state as well, as it would boil down to a contract interpretation issue.

« Last Edit: 06-10-10 at 09:18 pm by klaviernista »
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