Mistakes to Avoid in Drafting a License Agreement

The modern world of business and its accompanying transactions comprises various kinds of business relations. One among these is a license agreement.

In its basic explanation, it means it is legally binding between both parties where the licensor pretty much permits the other party (also known as the licensee) to produce and sell commodities, apply for a brand name or trademark that belongs to the licensor, or utilise the technologies or pattern which are owned by the licensor.

As you can see, whether it is for license agreement drafting or any other legal proceedings that may seem like something you cannot handle on your own, you can always seek professional assistance with legal help.

That being said, here are some of the

Common Mistakes to Avoid in Drafting License Agreement –

1. The Grant-Back Clause

One of the biggest mistakes to avoid when you are drafting the agreement is not adding a grant-back clause. When the drafter fails to add this, they basically fail to address the regulation of improvements made by the licensee.

It enables the licensee to proceed with improvement patents of their own, which have the chance of making the formulation product and technology of the licensor obsolete. It might even prohibit the licensor from profiting from their products or formulations with the enhancements.

When you include a ‘grant-back’ clause in a licensing agreement, you protect the licensor from being offered back any enhancement of the patented formulations or products that were licensed out. It can be utilised in agreements where the licensor can expect the other party to improve upon the licensed technology.

2. Failing to provide clarity in defining the involved parties

Another common mistake that is usually made when drafting a legal contract is failing to clarify which parties are involved. It may lead to confusion, disputes and even legal battles. The drafter must take the time to identify and describe each party in the contract to ensure that everyone understands the responsibilities, rights, and obligations clearly.

When you seek assistance from the best commercial lawyers Perth, you can be assured that you will not make this mistake.

3. Not setting the performance expectations.

The failure to offer a clause which states a well-written performance benchmark and expectations, along with a period or milestone model, to be followed and obtained would prevent the licensor from making the most out of their intellectual property.

The license would enable them to get away with making virtually no sales or meaningful preferences while still being locked up with the partial or overall license over the patented intellectual property.

This is exactly why including a clause stating performance expectations, such as the dates of initial marketing, minimum sales restrictions, and minimum royalty expectations, is essential.

4. Overlooking the royalty agreements

The royalty payments and financial terms are vital aspects of the license agreement drafting. Both of the parties have to agree upon and clearly state the financial obligations, such as payment timings, rates of royalty, and procedures. Neglecting to outline the terms might lead to unwanted issues and financial shortcomings for both the licensee and licensor.

5. Not providing for a patent marking clause

According to the laws of the patent act, the patent owners must mark the products with the patent number to collect damages for infringement of their patents. These sorts of damages can be collected in the time between the patent and the filing of the complaint by the patent owner or any other kind of notice of infringement that might have been brought to the attention of the alleged infringer by the owner of the product.

In addition to that, the patent’s authorized users have to take the initiative and mark the products protected from any types of license agreement claims of the patent.

These efforts made by the patent owner, along with the licensees who are authorized to offer a ‘constructive notice’ of patent protection, are made in order to safeguard the public from prosecution for innocent infringement.

6. Ignoring the applicable laws and regulations

When drafting a legal contract, you must ensure you are not overlooking any applicable regulations and laws. Ignoring this requirement can have grave consequences, including rendering the contract unenforceable or exposing you to potential legal liabilities. When you hire a license agreement lawyer Perth, you can be sure that the agreement will adhere to the regulations and laws.

Wrapping Up

Ignoring rules, patent marketing clauses, royalty agreements, and failure in setting performance expectations are some of the errors to note. You can avoid these errors with license agreement drafting. Since these issues require expert intervention and might not be manageable single-handedly, associating with an experienced lawyer will be a good decision.