CLP Licensing Procedures & Policies 2 — Questions and Answers
Question 1: When a licensee wants to sublicense rights to a third party, what must typically be present in the original license agreement?
- An automatic sublicensing right implied by law
- An explicit provision granting sublicensing authority (Correct answer)
- A verbal agreement between the parties
- A government registration of the original license
Correct answer: An explicit provision granting sublicensing authority
Sublicensing rights must be expressly granted in the original license agreement because they are not implied by default.
Question 2: In a field-of-use restriction, the licensee is limited to using the licensed technology in:
- Any industry the licensee chooses
- A specific defined application or market segment (Correct answer)
- All markets where the licensor operates
- Geographic territories only
Correct answer: A specific defined application or market segment
Field-of-use restrictions confine the licensee's exploitation of the technology to a specifically defined application or industry sector.
Question 3: What is the primary purpose of a license audit clause?
- To allow the licensor to take back IP rights
- To verify that royalty payments are accurately calculated and paid (Correct answer)
- To renegotiate royalty rates annually
- To terminate the agreement if sales decline
Correct answer: To verify that royalty payments are accurately calculated and paid
Audit clauses give the licensor the right to inspect the licensee's books to confirm royalties are correctly reported and paid.
Question 4: A 'most-favored licensee' clause ensures that:
- The licensee receives the lowest royalty rate the licensor offers any other party for comparable rights (Correct answer)
- The licensee gets first right of refusal on new IP
- The licensor must give 90 days notice before licensing competitors
- Royalties are automatically reduced each year
Correct answer: The licensee receives the lowest royalty rate the licensor offers any other party for comparable rights
A most-favored licensee clause contractually guarantees the licensee terms no less favorable than those offered to any comparable licensee.
Question 5: Which document is typically executed FIRST when two parties begin exploring a licensing relationship?
- License agreement
- Non-disclosure agreement (NDA) (Correct answer)
- Assignment of rights
- Royalty schedule
Correct answer: Non-disclosure agreement (NDA)
An NDA is signed first to protect confidential information shared during preliminary due diligence and negotiations.
Question 6: What does 'patent exhaustion' mean in the context of licensing?
- A patent expires due to non-payment of maintenance fees
- Once a patented product is sold, the patent holder cannot control resale of that item (Correct answer)
- A licensee has used all authorized manufacturing runs
- The licensor has exhausted all legal remedies against infringers
Correct answer: Once a patented product is sold, the patent holder cannot control resale of that item
Patent exhaustion (first sale doctrine) holds that a patent holder's rights in a specific item are exhausted upon authorized sale, limiting downstream control.
Question 7: When drafting a grant-back clause, a licensor typically seeks to:
- Prevent the licensee from filing any new patents
- Obtain rights to improvements the licensee makes to the licensed technology (Correct answer)
- Require the licensee to share all R&D budgets
- Eliminate the licensee's right to sublicense
Correct answer: Obtain rights to improvements the licensee makes to the licensed technology
Grant-back clauses require licensees to license back to the licensor any improvements developed using the original licensed technology.
CLP Licensing Procedures & Policies 2
When a licensee wants to sublicense rights to a third party, what must typically be present in the original license agreement?