CLP CLP International Licensing 2 — Questions and Answers
Question 1: What is a compulsory license in international IP law?
- A government-authorized license allowing a third party to use a patent without the owner's consent, typically for public health reasons (Correct answer)
- A license required by law before any technology can be exported to a foreign country
- An obligation on patent holders to license their IP to all willing applicants at set rates
- A license mandated by contract law when parties fail to negotiate voluntary terms
Correct answer: A government-authorized license allowing a third party to use a patent without the owner's consent, typically for public health reasons
A compulsory license is issued by a government to allow production of a patented item (e.g., medicine) without the patent holder's permission, permitted under TRIPS in specific circumstances.
Question 2: In international licensing, 'choice of law' clause designates:
- Which country's laws govern the interpretation and enforcement of the license agreement (Correct answer)
- The licensor's home country as the default venue for all disputes
- The currency in which royalties must be paid
- Which party bears the cost of foreign patent maintenance fees
Correct answer: Which country's laws govern the interpretation and enforcement of the license agreement
A choice-of-law clause specifies the governing jurisdiction's laws, which is critical in cross-border deals where countries have different contract and IP rules.
Question 3: Transfer pricing rules in international licensing require that intercompany royalties between related entities be set at:
- Arm's-length market rates as if the parties were unrelated (Correct answer)
- Rates approved by the OECD in its model tax convention
- Zero, since related-party transfers are tax-exempt
- The rate mandated by the licensor country's tax authority
Correct answer: Arm's-length market rates as if the parties were unrelated
Tax authorities in most countries require that royalties between affiliated companies reflect arm's-length pricing to prevent profit shifting to low-tax jurisdictions.
Question 4: The European Union's exhaustion doctrine in trademark and patent law holds that:
- Once a rights holder sells a product within the EEA, IP rights in that product are exhausted and cannot block further resale within the EEA (Correct answer)
- Patent rights are exhausted globally once a product is sold anywhere in the world
- Trademark rights are exhausted after 10 years of continuous use in the EU
- Exhaustion applies only to copyright, not patents or trademarks
Correct answer: Once a rights holder sells a product within the EEA, IP rights in that product are exhausted and cannot block further resale within the EEA
EU regional exhaustion means that after a first authorized sale anywhere in the European Economic Area, the IP holder cannot use IP rights to prevent resale within the EEA.
Question 5: Why are arbitration clauses particularly important in international license agreements?
- They provide a neutral, enforceable dispute resolution mechanism across borders without relying on any single country's court system (Correct answer)
- They eliminate all IP infringement liability for the licensee internationally
- They allow the licensor to unilaterally terminate the agreement without court approval
- They reduce withholding tax obligations under most bilateral tax treaties
Correct answer: They provide a neutral, enforceable dispute resolution mechanism across borders without relying on any single country's court system
International arbitration awards are enforceable in over 170 countries under the New York Convention, making them far more practical than foreign court judgments for cross-border disputes.
Question 6: Export control laws such as the US EAR (Export Administration Regulations) can affect technology licensing by:
- Requiring licenses or approvals before transferring certain controlled technologies to foreign licensees (Correct answer)
- Setting maximum royalty rates for technology exports to allied nations
- Prohibiting any IP licensing to entities in countries with trade surpluses with the US
- Mandating that all licensed technology be manufactured within the United States
Correct answer: Requiring licenses or approvals before transferring certain controlled technologies to foreign licensees
The EAR classifies dual-use technologies by ECCN and may require a US government export license before the technology can be licensed or disclosed to foreign persons.
CLP CLP International Licensing 2
What is a compulsory license in international IP law?