In continuation to our last blog – Structural Intricacies of IPR Usage Agreements – in this blog, we shall discuss the issues and grey areas pertaining to IPR Usage Agreements and the possible safeguards to tackle the same.
The common grey areas are: Licensing issues, misinterpretation of language, ownership issues, exclusivity issues, jurisdictional problems, issues pertaining to the term and termination of the Agreement, confidentiality issues, challenges pertaining to representations, warranties and consideration issues, etc.
Licensing Issues: IPR Usage Agreements can have a few issues regarding the licensing of the IP Rights. The grant of License has to be clear, complete, and specific. Any ambiguity with respect to the License Agreement could lead to a misuse of IP Rights. The parties, subject matter, rights, territory, exclusivity, term, payment, and restriction of use with grant of license can cause issues to arise in such agreements.
Misinterpretation of Language: The lack of specifying the ambit of IP Rights and improper grant language could also be an issue. The Licensee should have a clear idea with respect to his extent of use and the capacity he has for it. The current technology and software shall be supporting in the usage of the IP License.
Ownership Issues: The key issues and conflicts pertaining to IPR Usage Agreements usually arise out of the issue of ownership. It could be Sole or Joint Ownership. Issues could also arise regarding the status of the ownership of the Licensor and the Licensee.
Exclusivity Issue: Any third party, if granted the IP Rights by the owner, could misuse such Rights. There could be a conflict of interest between the parties who possess the IP Rights upon being granted express authority from the owners.
Jurisdictional Issues: The territory of the allowed usage of IP Rights could be another pressing issue for the parties. Jurisdiction and State/Union Territory laws can differ, thereby leading to breach in the said Agreement. The owner must make sure that he does not over-grant the IP Rights to the parties. Geographical limitations could restrict the competition of usage of IP Rights amongst competing businesses.
Term Issues: The term of the IP Rights License should not be vague or undetermined. While the upper limit of the grant is fixed by the statute itself, the lower limit depends on the exercise of discretion of the parties. Perpetual timelines could cause cumbersome issues with respect to IP Rights usage.
Confidentiality Issues: The information shared between the parties is not only monetarily but also technologically of utmost importance and, hence, should not become public and should remain confidential with respect to the IP Rights as well as the creation/invention.
Termination Issues: The Termination Clause has to be drafted keeping in mind the Agreement between the parties. It should also be clearly and unambiguously stated that if and when the Agreement is terminated, the IP will revert to the Licensor.
Consideration Issues: The Consideration Clause must entail the fee/payment that has to be made for availing the License to the concerned IP. This Clause must also define the manner in which such payments must be made. Ambiguous schedules for payment of could create further scope for conflicts between the parties.
Representation and Warranties: The Licensor must represent that he has the sole ownership of the IP and is entitled to grant the rights under the Agreement to the Licensee.
1. The interests of the parties to the Agreement need to be safeguarded. The IP Rights usage is meant to be mutually beneficial to both the parties to the Agreement and, hence, it is necessary to ensure that the Agreement provides for equal and balanced safeguards for both the parties as well;
2. Retaining the ownership of the IP Rights is considered one of the most important interests that need to be safeguarded. The creator/inventor (Licensor) shall be able to retain his ownership over the creation/invention and, at the same time, also be able to allow other parties to use the rights which would in return benefit the creator/inventor (Licensor) of the IP Rights;
3. The Licensee, by virtue of an IPR Usage Agreement, also gets a bundle of rights over the IP which benefits his trade throughout. In return for consideration, he/she gets access to such creation or inventions which, being novel in nature, can be beneficial for trade and business. It also provides substantial recognition which helps the product stand out in the market inviting more and more customers for the same;
4. As mentioned above, the Licensee gets a bundle of rights over the IP. In order to ensure that the Licensee only exercises such rights as the Licensor wishes to grant and no other, the Agreement may include an indicative list of rights being granted to the Licensee therein;
5. The Agreement must specify, in clear terms, that the Licensee will not have the right to further license the IP to a third party;
6. Remedies for breach of the Agreement also help safeguard the interest of both parties;
7. The Dispute Resolution Clause acts as a safeguard for the interest of both the parties to the Agreement by ensuring that, in case any dispute arises during the term of the IP usage, the parties can get the dispute resolved amicably in front of an authorized committee. This helps safeguard the interests of both the parties without letting any breach of Agreement occur and makes sure the IP usage continues smoothly.
The terms in the IP Usage Agreement, like under any other Agreement, should not be vague as such ambiguous terminology could lead to a lot of potential disputes between the parties. The Licensor and the Licensee should have a mutual understanding of the extent of the rights which have been transferred.
It should be taken into due consideration that all the aspects of how any IP Rights and the assignment thereof must work in furtherance of a smooth transfer of IP Usage Rights between parties, which is only possible if such Clauses are drafted properly in the Agreement. This could not only prove to be beneficial to all parties in the contract, but could also, in general, smoothen out the creases in the overall process of licensing and assigning usage of IP Rights, thereby furthering trade and commerce while also reducing the burden on the Judicial System in the form of reduction in avoidable disputes arising between the parties.
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