ContractsStructural Intricacies of IPR Usage Agreements- I

August 17, 20210


Intellectual Property Rights (IPR or IP Rights) are a bundle of rights that are given to a person for his creation or invention. These rights give the creator, author, or inventor, exclusive rights over his property and in-turn provide the right to decide on its usage. Intellectual Property means the creation, inventions, literary, and artistic works, etc.

The World Trade Organization (WTO) has defined IPR as: “Intellectual Property Rights are the rights given to persons over the creations of their minds. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time.”

What is an IPR Usage Agreement?

An IPR Usage Agreement is a bilateral or multi-lateral agreement where one or more persons or organization, having any IP Rights over the invention or creation gets into an agreement with one or more persons or organization to give the other party or parties the right to use such invention or creation.

Under such an Agreement, the owner of the IP Rights retains his rights over his invention or creation and merely grants the right to use them to the other party or parties, with respect to certain conditions. The same will be a contract if such an Agreement is in accordance with the law.

This article attempts to comprehensively discuss the prevailing procedural structure and regulatory framework pertaining to IPR Usage Agreements.



An IPR Usage Agreement must be drafted carefully and must contain all clauses unambiguously to avoid any disputes during the term of usage. The important clauses of an IPR Usage Agreement are- Recitals, Grant of License, License Fee/Royalty, Ownership of the IP, Quality Control Clause, Terms and Termination, Effects of Termination, Indemnification, Non-Disclosure Clause, Dispute Resolution, and other Miscellaneous Clauses.

1. Recitals

The first part of the Agreement should contain the Recitals. First and foremost, the names of the parties shall be expressly mentioned in the Agreement. The words ‘Licensor’ and ‘Licensee’ with respect to the parties shall be mentioned along with the date of the Agreement and the date on which the Agreement is to come into effect.

2. Grant of License

The Agreement shall also expressly mention the IP Rights which are to be licensed to third parties and whether or not the Licensee shall have exclusive rights over it without limitation. Any necessary terms, like the rights to further transfer usage shall also be mentioned clearly.

3. Licensee Fee/Royalty

Further, the Agreement shall also include the consideration involved in the said transfer of usage by the parties, in addition to the rights, if any, that the Licensee agrees to grant the Licensor.

4. Ownership of the IP

The Agreement shall also include, if any, rights that are to be retained by the Licensor. It shall also mention the provisions of Sub-Licensing, if any. All limitations with respect to the transfer of the usage of IP Rights shall be communicated well to the parties. Whether the Licensor can allow the usage of the IP Rights to any third party or not shall also be expressly mentioned in the agreement.

5. Quality Control Clause

Quality Control Clauses such as the Licensor’s policies and standards, Licensee’s compliance with the same, Licensee’s policies and standards, the Licensor’s compliance with the same, modifications, if any, limitations on the use, third party usage, etc., shall also be expressly mentioned in the Agreement.

6. Terms and Termination

The term of the usage of License and the effects thereof on the termination of the Agreement shall be mentioned unambiguously so as to avoid any disputes arising therefrom. The Agreement shall take into account the contingency of a breach and entail the Notice as well as the cure/rectification period along with the remedies to which the other party would be entitled to. The Termination Clause may also include the status of the License in the event of a bankruptcy of the Licensee. The applicability of the Agreement thereafter shall also be mentioned in the Agreement itself. The Injunctive Relief, if any, shall also be availed by either of the parties to the Agreement.

7. Effects of Termination

Obligations arising upon the termination of the Agreement, if any, that are to be adhered to by either party shall be expressly mentioned in the Clauses contained therein.

8. Indemnification

The Licensor shall assume no liability to the Licensee or any third party with respect to its IP Rights that are used by the Licensee or by any third party. The Agreement shall also mention the capacity of the Licensor to hold the Licensee liable for and/or to indemnify the Licensee of any losses or damages incurred and also the cost of enforcing such indemnification. The Licensee shall also indemnify the Licensor and keep the Licensor harmless from any damages or losses incurred and the cost of enforcing such indemnification.

9. Non-Disclosure Clause

The Licensor, being the sole creator/inventor of the concerned IP, has the rights to protect his product/creation/invention and, therefore, the Licensee shall make sure that any Confidential Information with respect to such IP Rights shall be kept strictly between the parties and the confidentiality thereof shall be maintained. The Licensor shall also maintain the same standards while dealing with any and all Confidential Information pertaining to the Licensee’s business. No Confidential Information, as per the Confidentiality Clause, with respect to the Agreement, is to be disclosed by either party to any third party.

10. Dispute Resolution

The Agreement shall also entail a Dispute Resolution Clause to resolve any disputes which may arise within the scope of the Agreement, during the stipulated term of usage of the IP Rights. The parties shall agree to all necessary terms of the dispute resolution method beforehand, within the Agreement itself, so as to avoid any confusion or uncertainty about the same.

11. Miscellaneous

Other general provisions like the Governing Law, Waiver, Binding Effect, Modification, Counterpart Signatures, Conflicts, Severability, Heading, Construction, etc., shall also be mentioned in the final part of the Agreement. The Agreement shall be signed by the parties with the name of the parties, their respective addresses and contact details, date of entering into the Agreement, effective date of the Agreement in the presence of two witnesses, or whatever the law provides.



The essential elements pertaining to an IPR Usage Agreement are similar to that of general agreements. However, IPR Usage Agreements require certain specific Clauses pertaining to licensing and ownership rights due to the technical nature of IPR.

IPR Usage Agreements deal with the exclusivity of rights over certain IPs that have to be drafted with utmost care and precision. Special attention should be paid to the extent to which the rights are being transferred to the Licensee. Also, in order to ensure the safety of interests of the parties, it is advised to include a Dispute Resolution Clause in the Agreement. This ensures the smooth usage of the IP rights.

Moving forward, in an upcoming blog, we shall discuss the key issues and safeguards pertaining to IPR Usage Agreements.



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