CLP CLP Royalty Auditing & Contract Management 3

Question 1

When a licensee transfers its business assets to a new owner, what license contract provision governs whether the license survives the transfer?

Accepted Answer

Assignment and change-of-control clause

Answer

Termination for convenience clause

Answer

Sublicensing restriction clause

Answer

Diligence obligation clause

Question 2

What is a 'license maintenance fee,' and how does it differ from a running royalty?

Accepted Answer

A periodic flat fee to keep the license active, independent of sales activity, unlike a running royalty tied to revenue

Answer

A fee paid to the patent office to maintain the licensed patent

Answer

An annual increase to the royalty rate to account for inflation

Answer

A payment made only when the licensee fails to meet minimum royalty obligations

Question 3

A 'most-favored nation' (MFN) clause in a license agreement regarding royalty rates means:

Accepted Answer

If the licensor later grants a lower royalty rate to another licensee in comparable circumstances, the existing licensee is entitled to that lower rate

Answer

The licensee receives preferential treatment in all commercial negotiations with the licensor

Answer

The licensor must charge foreign licensees the same rate as domestic licensees

Answer

Royalty rates are fixed and cannot be renegotiated for the life of the license

Question 4

What is the significance of a 'cure period' in a license termination clause?

Accepted Answer

It gives the breaching party a defined time to remedy a default before termination becomes effective

Answer

It specifies how long after expiration the licensee may sell off existing inventory

Answer

It defines the notice period required before a party may initiate arbitration

Answer

It sets the time window during which audited shortfalls must be repaid

Question 5

Under contract management best practices, when should a licensor send a royalty reminder notice?

Accepted Answer

Before the royalty report due date, typically 2–4 weeks in advance, to ensure timely submission

Answer

Only after the payment is already 60 days past due

Answer

Immediately after executing the agreement and never again

Answer

Only at the licensor's discretion and without any set schedule

Question 6

What is a 'survival clause' in a licensing agreement?

Accepted Answer

A provision specifying which obligations (e.g., confidentiality, indemnification, audit rights) remain enforceable after the agreement expires or is terminated

Answer

A clause automatically renewing the license unless one party opts out

Answer

A provision keeping the license active despite a licensee's bankruptcy filing

Answer

A term ensuring the licensed IP rights survive the licensor's own patent expiration