International IP Licensing

Creating effective contracts

Humans have always been innovative, using ingenuity and acquired knowledge to improve their own lives.

Huge leaps forward have been made in the last 100 years as inventions ranging from antibiotics to airplanes have revolutionised our existence. As our technological achievements become ever more complex, so the scope for further invention grows.

Our global, industrialised economy gives tremendous potential for a rapidly increasing number of valuable brands, inventions and other intellectual property. It also increased the need to protect those valuable assets for the benefit of their owners.

According to the World Intellectual Property Organisation (WIPO), there were almost 14 million patents in force worldwide in 2017 and more than 43 million active trademark registrations. Innovators around the world filed more than 3 million patent applications in 2017 alone, representing an eighth year of consecutive growth.

Asia has overtaken the US as the region where IP offices received the highest number of applications for patents, utility models, trademarks and industrial designs. Asia received 65 per cent of all patent applications made worldwide in 2017, while China alone holds 15 million active trademark registrations.

Protecting all these ideas, inventions and brands is big business for IP lawyers, but can be exceptionally complex, especially where multiple jurisdictions are involved. Licensing is a common method of exporting IP into new markets, but there are many hurdles that must be identified and overcome in order to ensure an international licensing agreement is suitable for both licensors and licensees.

An effective licensing agreement will initially consider what type of IP is being licensed and adapt accordingly. Trade secrets, patents, copyrights and trademarks all have different requirements and should be treated differently. As an example, some countries do not have fully developed laws covering the protection of trade secrets and therefore contracts agreed in those jurisdictions are likely to be vulnerable in case of a dispute.

The choice of jurisdiction and applicable law is crucial and should satisfy both parties. Many licensees will prefer a neutral jurisdiction with a good track record of expertise and impartiality when resolving IP disputes; such as Switzerland, the UK or Singapore.

Issuing multiple IP licenses can increase the complexity of the process and require a significant amount of due diligence, to ensure that territorial rights are correctly apportioned and subsequently respected. Specific grant clauses must be included within contracts to ensure that licensees understand the limitations of their ownership. These clauses will explicitly state the extent to which IP can be utilised.

Naturally, with multiple licenses in place over time, improvements will be made to the IP. Ownership may become confused between the licensor of the original IP and the licensees who wish to carve out their own IP rights. This must be handled sensitively by the IP lawyers involved, opening channels of communication and developing a new IP agreement to accommodate these developments.

Another challenge in the use of multiple licensing, is active and passive sales and the use of online sales to circumvent territorial rights. Although this cannot always be controlled, the IP lawyer must try to balance the needs of both the licensor and licensee when resolving any contractual disputes along these lines.

In the following pages, we bring readers the expertise and insight of six experienced IP lawyers from a range of jurisdictions around the world. They give their views on the process of licensing IP to international parties and share their experiences of doing this. They analyse the complexities of multiple licensing arrangements and consider the types of clauses they would expect to see in effective licensing agreements.