CLP Compliance & Risk Management 3 — Questions and Answers
Question 1: Under U.S. antitrust law, which type of licensing restriction is evaluated under the 'rule of reason' rather than treated as per se illegal?
- Horizontal price-fixing among competitors
- Territorial restrictions in vertical licensing agreements (Correct answer)
- Bid-rigging in patent pools
- Market allocation among direct competitors
Correct answer: Territorial restrictions in vertical licensing agreements
Territorial restrictions in vertical licensing agreements (between licensor and licensee at different market levels) are evaluated under the rule of reason, balancing pro-competitive and anti-competitive effects.
Question 2: A licensor includes a clause requiring the licensee to purchase non-patented supplies exclusively from the licensor. What potential legal issue does this raise?
- Patent misuse and antitrust tying concerns (Correct answer)
- Breach of the covenant of good faith
- Violation of the first sale doctrine
- Infringement of trade secret rights
Correct answer: Patent misuse and antitrust tying concerns
Requiring purchase of unpatented supplies as a condition of a patent license raises patent misuse concerns and may constitute an illegal tying arrangement under antitrust law.
Question 3: Which element is NOT typically part of a comprehensive IP risk assessment for a licensing transaction?
- Freedom-to-operate analysis
- IP ownership chain of title review
- Assessment of the licensee's marketing budget (Correct answer)
- Third-party claim landscape review
Correct answer: Assessment of the licensee's marketing budget
The licensee's marketing budget is a commercial consideration, not an IP risk assessment element; IP risk assessments focus on ownership, validity, enforceability, and third-party conflict issues.
Question 4: What does a 'field of use' restriction in a license agreement primarily accomplish from a risk management perspective?
- It limits the licensor's exposure by preventing the licensee from competing in the licensor's core markets (Correct answer)
- It establishes minimum quality standards for licensed products
- It determines the applicable law governing the agreement
- It specifies the royalty calculation methodology
Correct answer: It limits the licensor's exposure by preventing the licensee from competing in the licensor's core markets
Field of use restrictions limit the licensee to specific applications or markets, which manages the licensor's risk by preventing competition in markets the licensor wishes to retain or license separately.
Question 5: In the context of licensing compliance, what is 'shelf auditing'?
- Physical inspection of retail products to verify licensed marks and quality standards (Correct answer)
- Review of archived contract documents for compliance
- Inventory counting at licensee warehouses
- Verification of digital asset libraries
Correct answer: Physical inspection of retail products to verify licensed marks and quality standards
Shelf auditing involves physically inspecting products in retail environments to verify that licensed trademarks, copyright notices, and quality standards are properly applied to authorized products.
Question 6: When assessing country risk in international licensing, which factor most directly affects the enforceability of IP rights?
- The country's GDP growth rate
- The strength of local IP laws and judicial enforcement mechanisms (Correct answer)
- The bilateral trade deficit between the countries
- The licensee's local market share
Correct answer: The strength of local IP laws and judicial enforcement mechanisms
The strength and reliability of local IP laws and judicial enforcement mechanisms directly determines whether the licensor can effectively enforce its rights if the licensee breaches the agreement.
Question 7: A licensor discovers unauthorized sublicensing by its licensee. Beyond terminating the agreement, what additional legal remedy is most commonly pursued?
- Filing a breach of contract claim for damages including lost royalties from sublicensees (Correct answer)
- Seeking cancellation of the original patent
- Filing a criminal complaint for trademark counterfeiting
- Requesting renegotiation of royalty rates
Correct answer: Filing a breach of contract claim for damages including lost royalties from sublicensees
Unauthorized sublicensing constitutes breach of contract, entitling the licensor to sue for damages including lost royalties that would have been earned from properly authorized sublicensees.
CLP Compliance & Risk Management 3
Under U.S. antitrust law, which type of licensing restriction is evaluated under the 'rule of reason' rather than treated as per se illegal?