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

The assignment and change-of-control clause specifies whether the license may be transferred to a new owner and under what conditions, protecting the licensor from unwanted counterparties.

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 maintenance fee is a periodic fixed payment ensuring the license remains active regardless of whether the licensee is actively selling, providing the licensor a guaranteed income stream.

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

An MFN royalty clause ensures the existing licensee benefits from any better rate the licensor offers to others, preventing the licensor from discriminating after signing.

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

A cure period (typically 30–90 days) allows a party in breach to fix the problem—such as a late royalty payment—before the other party can terminate the agreement.

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

Proactive reminder notices before due dates reduce late payments, demonstrate active management, and create a record that supports any subsequent default or termination claim.

(CLP) Certified Licensing Professional Practice Test

(CLP) Certified Licensing Professional Practice Test

CLP CLP Royalty Auditing & Contract Management 3