Particular circumstances affect every licence agreement so no standard agreement can be offered for use in all cases. The faults in many licence agreements are those of omission and the following pointers are given to suggest the essential clauses:-
1. The period of the licence and whether exclusive or not, also whether assignable or not.
2. The down payment to be made on the signing of the agreement and/or an advance payment in respect of royalties.
3. The amount of royalty to be paid on each item sold, hired or rented, such royalty to be either a fixed sum per item or a percentage on the price, usually manufacturer's price to the trade.
4. An agreed guaranteed annual minimum royalty and allowance for the termination of the licence if such minimum is not paid in any one year, or if royalties are in arrears.
5. Statement on what dates royalties are payable, usually quarterly or half-yearly and the usual clause for verification of accounts by the Patentee's representative.
6. Whether the Patentee or the Licensee pays the Renewal Fees. Whichever party pays the Renewal Fees the certificates of renewal should be submitted to the other party within seven days of the renewal date.
7. Who pays the cost of the preparation of the licence.
8. In the case of infringement which party is responsible for the costs of any action taken. Under no circumstances whatever should Patentees accept a clause which makes them responsible for commencing infringement action, or defending an action against the validity of a patent. It is desirable that it be open for either the Licensee or the Patentee to take action, but that is not obligatory upon the Patentee to do so.
9. The Licensee not to question the validity of the patent.
10. A clause which make provision of the licence to terminate if the Licensee becomes bankrupt or goes into liquidation, voluntary or otherwise.
11. The Licensee must undertake to mark with the Patent number all articles made under the patent.
This document was not originated by Craske & Co. - Source unknown.
Last updated: 11 February 1998