Technology license and contracts

Technology license and contracts

1. The purpose of licensing negotiations

   • Is both sides to identify clearly what each wants from the commercial arrangement they intend entering into
   • The objective is to
     • achieve an outcome, where each side is clear on what it is giving and receiving from the agreement and that each party is has gained a sense of trust and fairness from the other

2. The licensee should

   • have an appreciation of the commercial potential of the technology and be able to convince the licensor he has the capability to fully exploit it.
   • In the licence agreement
     • the licensor agrees to provide the licensee with the use of his property. In return for exchange of the valuable IP, the licensee agrees to pay the licensor a fee and/or royalties as consideration.

3. The terms

   • THE LICENCE FEE: ‘down payment’ is a payment that, typically, is separate to royalty payments.
     • For a proven technology or product, which is already in commercial operation and is being transferred as a turn-key technology package to the licensee
       • the licence fee is usually a set fee which all licensees pay.
   • ROYALTIES: Normally, royalties are paid in addition to the licence fee.
     • If the parties are unsure of these, then the next best approach to selecting a royalty rate is to compare known royalty rates for similar products in similar markets.
   • SETTING THE ROYALTY RATE: In setting the royalty, consideration must be given to the end-use or application of the product or technology.
     • A stand-alone product or process based completely on the licensed technology is more straightforward than a case where the technology is only part of a whole.
   • MINIMUM ROYALTY: The licensor should have an expectation of achievable annual sales. A minimum royalty can be based on this market forecast.
     • The minimum royalty also ensures that the licensee actively exploits the licence and does not use it as a blocking manoeuvre towards competitors.

4. Heads of Agreement – Licence

   • Parties - Start date - Duration - Nature of licensed IP - Work schedule - Costs - Lump sum/royalties - Payment schedule - Licence option - Option term on licence.
   • Right of first refusal - Scope of licence - Exclusivity - Liability - Ownership of IP - Ownership of improvements - Infringement - Termination - Choice of law - Dispute resolution.

5. OSCAR HUMBERTO CALERO VALENCIA. Group 212032_95