Preparing license agreements

In modern conditions, the market of intellectual property objects (hereinafter referred to as IP) is developing around the world at with an accelerated rate. Ukrainian business is no exception, especially in the field of IT.

There are two purposes of creating IP:

  • the creator implements and uses the object for its own economic benefits and projects,
  • or, in the second case, the creator transfers the object for use by other persons and receives the appropriate material reimbursement.

It is for the second case that it becomes necessary to conclude a license agreement between the developer and the user of IP. The owner of IP often invests huge amounts of money in its creation and development, therefore, presenting its product at the market, it wants to protect itself as much as possible.

Both the licensor and the licensee must carefully prepare for the conclusion of a license agreement and take into account all the parameters and conditions that protect both parties from possible potential risks, as well as the legislation provisions governing the relevant legal relationship

At the same time, when the parties of a license agreement are residents of different countries, foreign law must be taken into account. This is where a lot of nuances and questions arise. Starting from the law of which country to determine as applicable, and ending, in fact, with the preparation of the license agreement text, taking into account the requirements of this law. Indeed, when concluding a license agreement, the parties think more about the commercial aspects of cooperation than about possible legal niceties. As a result, most of license agreements occurred in practice have gaps that must be filled in and which, in the event of a dispute, will necessarily require interpretation in accordance with the applicable law.

Obligatory conditions of a license agreement:

The structure and content of a license agreement depends on IP and the provisions of the applicable law. Nevertheless, in the legislation of Ukraine there is a list of obligatory conditions that any license agreement must contain:

  1. License type. The license can be:

–  exclusive (issued only for one licensee, with the licensor’s prohibition to use the IP within the scope limited by this license, as well as transfer the IP to third parties);

–  single (issued for only one licensee for use within the scope limited by this license, but with the licensor’s right to use the IP);

–  non-exclusive (the licensor can use the IP and issue a license to third parties).

  1. Scope of use of the object of intellectual property rights (specific rights that are provided by the agreement, methods of using the object, territory and term);
  2. Size, procedure and terms of remuneration payment for the use of the object of intellectual property rights. There are three types of payment under a license agreement – royalty, lump-sum and combined.

In the case of IT objects of intellectual property, VigoLex team pays special attention to such conditions as confidentiality, technical maintenance of the object, security and protection of personal data.

Registration of a license agreement is it necessary or not?

In order that a license agreement has legal force in Ukraine, it is enough to conclude it in a simple written form.

In practice, in most cases, a license agreement for software transfer is not registered, while an agreement for transfer of ownership for a mark for goods and services is desirable to register. In addition, some countries, in particular the Russian Federation, considers the registration of license agreements obligatory. Thus, the lack of state registration of an agreement in those jurisdictions where there is a mandatory requirement will lead to the transaction invalidity. Therefore, in order to protect yourself from potential risks, you should contact professionals in this area.

The law firm VigoLex pays attention to the fact that the license agreement involves both parties in a fairly long-term cooperation, therefore, it is important to foresee all legal and tax nuances in advance. Indeed, despite the rapid progress in business, legal carelessness and haste can lead to adverse consequences and unpredictable material losses.

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