Licence agreement

08 Mar 2022

What are licence agreements?

The starting point is that the owner or right holder has the exclusive right to use his right. In most cases, this involves the use of intellectual property rights, such as a patent, a trademark, a domain name or software. If another party makes use of this right without permission, he runs the risk of committing an infringement and having to pay compensation for the damage suffered by the rights holder. In many cases, however, the intention is for others to make use of the right, particularly from a commercial point of view.

Another possibility is that different companies within one group make use of the same right. In both cases, the entrepreneur would be wise to arrange this use with a licence agreement (or user agreement).

Content of licence agreement

The licence agreement regulates the conditions under which one party (licensee) may use rights of the other party (licensor). In this way the licensor has the certainty that he is not infringing and can also demonstrate this. The advantage for the licensor is that he holds the licensee to his obligations.

The licence agreement shall describe the scope of the licence as accurately as possible. The following questions are at least important in this respect:

  • What exactly may the licensee use?
  • Are there territorial or other specific restrictions?
  • When may the licensee not use the right?
  • When does the right of use expire?
  • Is the licensee the only party getting the use (exclusivity) or are there multiple licensees?
  • Can the licensee transfer the licence and may he issue sublicences?

In addition to the description of the scope, the licence agreement also deals with the payment for use and termination. After all, the licensor has an interest in ensuring that payment for use is made and that the right of use is terminated as soon as possible if the licensee is no longer able to meet the payment obligations. This is for instance the case when the licensee goes bankrupt.

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