Licensing of Intellectual Property

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Jay Dratler, Jr., Stephen McJohn

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Licensing of Intellectual Property is the definitive treatise in the field. It provides in-depth coverage of not only standard contract provisions, but also the intellectual property, antitrust, misuse, and common-law and unauthorized copying issues involved in licensing transactions that are not always directly reflected in contract language. These include: implied licenses; the difficult relationship between antitrust and intellectual property; antitrust and misuse limitations on licensing terms; the influence of trade secret protection and patent expiration and invalidation on licensing and royalty terms; licensees' standing to sue for infringement of licensed intellectual property; the use of declaratory judgments to challenge the validity, enforceability or infringement of licensed intellectual property; and the effect of the Supreme Court's eBay decision on licensing-related remedies. Appendices provide sample patent licensing and Web publishing agreements.

Coverage includes step-by-step guidance and in-depth analysis of: patent license agreements for use with developmental biotechnology; state vs. federal jurisdiction; the standing of co-owners and licensees of intellectual property to sue infringers separately; the federal agencies' Licensing Guidelines; the impact of anti-cybersquatting laws and the Digital Millennium Copyright Act; how infringement warranties and indemnities help shape business transactions; licensing of commercially valuable technology that may not be patentable; the legal status of the essential facilities doctrine; and the validity of field-of-use restraints, exclusivity, territorial restraints, tying, package licensing, grantbacks and other contractual restraints in the United States, Europe and Japan. The analysis of EU law includes the block exemption for technology transfer agreements and related guidelines.

Licensing of Intellectual Property also explores: when an involuntary license can be implied; whether, when and how a licensee may challenge the validity of intellectual property; what effect licensing and licensing negotiations may have on declaratory judgments of patent invalidity; when courts may decline to exercise their declaratory judgment jurisdiction; how inevitable confusion affects courts willingness to find equitable licenses in trade symbol cases; how most-favored-licensee clauses work in practice; and how the Robinson-Patman Act applies to royalties and licenses.

Book #00627; looseleaf, two volumes, 2,104 pages; published in 1994, updated as needed; no additional charge for updates during your subscription. Looseleaf print subscribers receive supplements. The online edition is updated automatically. ISBN: 978-1-58852-064-7.

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  • Availability: Available
  • Brand: Law Journal Press
  • Product Type: Books
  • Edition: 0
  • Page Count: 2104
  • ISBN: 978-1-58852-064-7
  • Pub#/SKU#: 627
  • Volume(s): 2

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  • Jay Dratler, Jr.

Professor Jay Dratler, Jr. brings to this book the unique perspective of a scientist, engineer, lawyer and law professor. After receiving his doctorate degree in physics from the University of California in San Diego in 1971, he spent four years working as a scientist and engineer. His work included eighteen months managing the electronics laboratory of a start-up, high-technology company.

Professor Dratler completed his legal education at Harvard Law School, where he graduated magna cum laude in 1978 after serving as Articles Editor of the Harvard Law Review. He practiced law for more than eight years, first with Morrison & Foerster in San Francisco, then in Californias Silicon Valley with Fenwick, Davis & West (now Fenwick & West). In 2010, Dr. Dratler retired as the Goodyear Professor of Intellectual Property, Emeritus at the University of Akron School of Law, in Akron, Ohio. There he taught Computer Law, Copyright, Cyberlaw, Introduction to Intellectual Property, Licensing and Trade Secrets, and Patent Law and Policy.

He is the principal author (with Professor Stephen McJohn) of a four-volume treatise on intellectual property, a one-volume treatise on cyberlaw and a two-volume treatise on licensing. Professor Dratler still teaches special courses in the US and Australia, consults on IP licensing and strategy and is a member of the American Bar Association, the American Intellectual Property Law Association and the American Law Institute.

Also by Jay Dratler, Jr.:
Intellectual Property Law: Commercial, Creative and Industrial Property
Cyberlaw: Intellectual Property in the Digital Millennium

Author Image
  • Stephen McJohn
Professor Stephen McJohn is a professor at Suffolk University Law School in Boston, Massachusetts where he teaches in the areas of intellectual property and commercial law. His scholarly interests lie in areas touching on law and technology, such as intellectual property, computer law, artificial intelligence and legal reasoning, and economic analysis. Professor McJohn received his B.A. in Computer Studies and his J.D., magna cum laude, from Northwestern University. After studying law in Germany and completing a federal appellate clerkship, he practiced law in the Chicago office of Latham and Watkins and taught at the IIT Chicago-Kent School of Law.

Also by Stephen McJohn:
Intellectual Property Law: Commercial, Creative and Industrial Property
Cyberlaw: Intellectual Property in the Digital Millennium


Introduction to Licensing

§ 1.01 What Is Licensing?
[1] Types of Licensing Agreements
[2] Requirements for Effective Licensing Agreements
[3] Nature of Rights and Unlicensable Rights
§ 1.02 Innovation and Licensing in a Worldwide Marketplace
[1] Two Paradigms of Intellectual Property Law
[2] Innovation in the International Marketplace
§ 1.03 Business Advantages of Licensing
[1] “Leveraging” Resources
[2] Broadening Geographic Markets
[3] Broadening Product Markets
[4] Obtaining Early Market Entry
[5] Increasing Market Penetration Through Complementary Products
[6] Obtaining Additional Revenue
[7] Technology “Barter”
[8] Enhancing Reputation and Goodwill
[9] Controlling Exploitation
§ 1.04 Business Disadvantages of Licensing
[1] Loss of Control Over Exploitation
[2] Loss of Contact with Customers
[3] Loss of Incentive for Expansion
[4] Loss of Incentive for Vertical Integration
[5] Loss of New Business Opportunities
[6] Dependence on Others for Revenue
[7] Risk of Piracy
[8] Loss of Technological “Edge”
[9] Loss of Public Recognition
§ 1.05 The Subject Matter of Licensing: Bundles of Intangibles
[1] “Bundles” of Rights in Intellectual Property
[2] Combining Bundles of Rights
§ 1.06 Open Source Licensing
[1] The Legal Status of Open Source Software

Express Licenses as Contracts

§ 1A.01 The Scope of a License
[1] The Subject of the License
[2] The Licensed Intellectual Property
[3] The Rights Conveyed
[4] The Field(s) of Use
[5] Exclusivity Vel Non
[6] Territorial Limitations
[7] Temporal Limitations (Duration)
[8] Cross-Licensing
[9] The “Sense of the Deal” and Its Impact in the Courtroom
§ 1A.02 Supervening Federal Principles
[1] Federal Preemption Generally
[2] Supervening Principles of Federal Policy Applicable to Licensing Generally
[3] Sovereign Immunity
§ 1A.03 General Principles of Contract Interpretation for Licenses
[1] Licenses as Contracts under State Law
[2] Contract Formation
[3] General Rules of Interpretation
[4] Covenants and Conditions and their Different Effects
[5] Rescission and Restitution
[6] Agreements to Agree and the Risks Posed by Termsheets
[7] Implied Covenants of Good Faith and Fair Dealing
[8] Agreements to Arbitrate Disputes

Invalid Intellectual Property

§ 2.01 Introduction
§ 2.02 Licensee’s Right to Repudiate the License Agreement
[1] Licensee Estoppel and No-Contest Clauses
[2] Repudiation of Licenses for Reasons Unrelated to Intellectual Property
§ 2.03 Licensee’s Right to Recover Royalties Already Paid for Rights Under Invalid Patent
[1] Recovery of Royalties Already Paid for Licenses Under Invalid Patents: The General Rule
[2] Challenges to Patent Validity Brought by Third Parties
[3] Involuntary Escrow and the Right to Interim Royalties
§ 2.04 Refusing to Take a “License” Under Invalid Intellectual Property
[1] Threshold Requirements for a Successful Antitrust Claim: Objective Baselessness and Bad Faith
[2] Other Elements of the Antitrust Offense
[3] Legal Relief
[4] Procedure: A Compulsory Counterclaim?
§ 2.05 Third-Party Causes of Action
[1] Contributory Infringement
[2] Unjust Enrichment
[3] Interference with Contract
[4] Interference with Business Relations or Prospective Economic Advantage

Declaratory-Judgment Actions in Patent Law

§ 2A.01 Background
[1] The Importance of Declaratory Judgments in Patent Law
[2] The Constitutional and Statutory Conditions for Declaratory Judgments
§ 2A.02 The MedImmune Decision and Its Effect
[1] The Supreme Court’s Decision
[2] The Federal Circuit’s View
[3] Open Issues
§ 2A.03 Pre-MedImmune History
[1] Overview
[2] The Repudiated “Reasonable Apprehension of Suit (RAS)” Test
[3] Infringement or Preparation for It
§ 2A.04 Declaratory Judgments and the Licensee’s Dilemma

Involuntary Licensing

§ 3.01 Introduction
§ 3.02 The Strength of Exclusivity: Refusal to License and Patent Suppression
[1] Property, Exclusivity and the Free Market
[2] Refusal to License Patents
[3] Refusal to Grant Nonpatent Licenses
[4] Patent Suppression
[5] General Limitations
§ 3.03 Statutory Compulsory Licensing
[1] Compulsory Licensing Laws Abroad
[2] Compulsory Licensing in the United States
[3] The Collective-Work Publisher’s Privilege
§ 3.04 Implied Licenses
[1] The General Standard for Implied Licenses
[2] Implied Licenses and Most-Favored Licensee Clauses
[3] Sale of Nonstaple Components
[4] Use of Purchased Items in Patented Method or Process
[5] Authorized Modification
[6] After-Acquired Patents
[7] Employed Inventors
[8] Implication of Licenses Under Nonpatent Intellectual Property
§ 3.05 Equitable “Licenses”: Laches and Estoppel
[1] Laches
[2] Comparing Laches and Estoppel
[3] Estoppel
[4] An Intermediate Defense?
[5] Acquiescence
§ 3.06 Denial of Injunctive Relief
[1] The Injunction as a Standard Remedy for Infringement
[2] “Compulsory Licensing” Through Denial of Injunctive Relief
[3] The Effect of Denying Injunctive Relief

Royalties and Other Monetary Consideration

§ 4.01 Introduction: What Is a Royalty?
§ 4.02 Amount of Royalty
[1] Absence of General Restrictions on Royalty Rate
[2] Antitrust and Contractual Restrictions
[3] Custom and Practice
§ 4.03 The Royalty Base
[1] Interpretation of Royalty Base Provisions in Patent Licenses
[2] Effect of First-Sale or “Exhaustion” Doctrine on Royalty Base
[3] Royalties on Unpatented Subject Matter
§ 4.04 Total Sales Royalties
[1] Business Considerations
[2] The Supreme Court’s Automatic Radio and Zenith Decisions
[3] Practical Effect of Rule
[4] Future of the Zenith Rule
[5] Expiration of Patents
[6] Nonpatent Licensing
§ 4.05 Royalty Rate Discrimination
[1] Section 2 of the Clayton Act
[2] Sherman Act Restrictions
[3] Price Discrimination and Intellectual Property
[4] Misuse Doctrine
§ 4.06 Predatory Pricing
[1] The Concept of Predation: Trading Short-Term Loss for Long-Run Gain
[2] Governing Law
[3] Identifying Predatory Pricing
[4] Predatory Pricing and Intellectual Property
§ 4.07 Other Consideration
[1] Nonequivalence of Different Forms of Consideration
[2] Characterization of Consideration

A Brief Primer on Antitrust Law and Misuse Doctrine

§ 5.01 Introduction: The Relevance of Antitrust and Misuse
§ 5.02 United States Antitrust Law
[1] Goals and Purposes
[2] The Sherman Act
[3] The Clayton Act
[4] Enforcement of United States Antitrust Law
§ 5.03 Antitrust Law in the European Union
[1] Article 85
[2] Article 86
[3] Enforcement
[4] Negative Clearances, Exemptions, and Comfort Letters
[5] Block Exemptions
§ 5.04 Misuse Doctrine
[1] Historical Origins of Misuse Doctrine
[2] Patent Misuse, the Antitrust Laws and Purging
[3] Copyright Misuse
[4] The 1988 Patent Misuse Amendments
[5] Analysis and Critique
[6] Misuse of Intellectual Property and Antitrust: A Gradual Reconciliation


The Relationship Between Intellectual Property and Antitrust Law

§ 6.01 Introduction
§ 6.02 Basic Principles and Policies
[1] Complementary Goals
[2] Potentially Conflicting Means
§ 6.03 Failed Approaches to the Patent-Antitrust Interface
[1] The “Scope of Patent Protection” Doctrine
[2] Inherency Theory
§ 6.04 A Suggested Method of Analysis
[1] The Economic Approach: Optimization and the Problem of Indeterminacy
[2] A Legal Approach: Balancing the Policies Underlying the Law
[3] A Suggested Test for the Validity of Contractual Restraints in Licensing
§ 6.05 An Analytical Tool Kit
[1] The Primary Mode of Antitrust Analysis—The Rule of Reason for Vertical Restraints
[2] Applying Antitrust Analysis to Licensing
[3] Maintaining the Limited Term of Protection
[4] “Naked” Versus “Ancillary” Restraints
[5] Nonpatent Licensing

Common Restrictive Practices in Licensing: An International Overview

§ 7.01 The “Triage” Approach in the United States, Europe, and Japan
[1] The Triage Approach in the United States
[2] Triage in the European Union
[3] The Triage Approach in Japan
[4] Application of the Triage Approach
§ 7.02 Restriction on the Sale of Products of Patented Processes
§ 7.03 Royalties on Unprotected Items
§ 7.04 Field-of-Use Restraints
§ 7.05 Restraints on Protected Products After Their First Authorized Sale
§ 7.06 Tying
[1] In General
[2] Tying Software to Dominant Platforms
§ 7.07 Mandatory Package Licensing
§ 7.08 Exclusive Dealing
§ 7.09 Grantbacks and Back-Licenses
§ 7.10 Price Fixing
§ 7.11 Territorial Restraints
[1] The United States
[2] Europe
[3] Japan

Exclusive Licenses

§ 8.01 The Nature of an “Exclusive License”
[1] The Exclusive Licensor’s Rights
[2] Co-Ownership and Exclusive Licenses
§ 8.02 Recordation of Exclusive Licenses
[1] Patents
[2] Copyrights
[3] Trademarks
[4] Semiconductor Chip Protection
[5] Intellectual Property Protected Under State Law
§ 8.03 Legality of Exclusive Licensing
[1] Vertical Versus Horizontal Effects
[2] Patent Pools and Cross-Licensing
§ 8.04 Enforcement of Exclusivity
[1] Enforcement Against Third Parties
[2] Enforcement Against Licensor
§ 8.05 Acquisition of Exclusivity
[1] Acquisition of Intellectual Property Ownership
[2] Nonexclusive Licensee’s Acquisition of Intellectual Property
[3] Nonexclusive Licensee’s Veto Over Further Licenses
§ 8.06 Exclusivity and Standing to Sue
[1] Patent Licensee’s Standing
[2] Copyright
[3] Mask Works
[4] Trademarks
[5] Trade Secrets
§ 8.07 Exclusive Licensee’s Obligations of Diligence
[1] Implied Obligations
[2] Explicit But General Obligations
[3] Specific Obligations

Most Favored Licensees

§ 9.01 Introduction
§ 9.02 More Favorable Terms
[1] Rates, Royalties and Other Terms
[2] “Entire Agreement” Clauses
[3] Retroactivity
[4] Implied Licenses
[5] Evaluating the Package of Consideration
[6] The Purpose of Most-Favored-Licensee Clauses
§ 9.03 Procedural Triggers
§ 9.04 Problematic “More Favorable” Terms
[1] Infringement Settlement Licenses
[2] Lump-Sum Conversions and Volume Requirements
[3] Other “More Favorable” Terms
[4] Voluntary Notification
§ 9.05 Making Most-Favored-Licensee Clauses Work: Author’s Comments
[1] Exclusions and Limitations
[2] Acceptance of Entire Agreement
[3] Coordination of Licensing Administration

Allocating the Risks of Infringement

§ 10.01 Introduction
§ 10.02 Risks of Third-Party Infringement Claims Against Licensees
[1] The Risk of Infringement of Third-Parties’ Rights
[2] Implied Warranties and Indemnities
[3] Business Justification for Covenants to Indemnify or Defend
[4] Interpretation and Enforcement of Indemnities
[5] Legal Consequences of Infringement Indemnities
[6] Common Risk-Sharing Provisions

Special Problems in Licensing

§ 11.01 Introduction
§ 11.02 Marking Requirements
[1] Patent Marking
[2] Trademark Marking
[3] Semiconductor Chip Protection
[4] Copyright Marking
[5] Trade Secrets
§ 11.03 Quality Control in Trade Symbol Licensing
[1] Control Theory
[2] An Overview of Licensing Control Law
[3] Consequences of Failure of Control
[4] The Legal Standard for Control
[5] What Should Licensors Do?
§ 11.04 Breach of License as Computer Fraud
[1] Computer Fraud and Abuse Act
[2] “Unauthorized Access” as Defined by Case Law