Territorial scope. Unless no explicit territorial restrictions are included in the licensing agreement, it is considered that the granting of a licence is geographically co-extensive with the territorial scope of the intellectual property concerned, although the rules on patent licensing are somewhat different. For example, when a license relates to a U.S. patent, the geographic scope of the license may not be limited to the United States. Some courts have held that the reference to a particular patent relates to the nature of the products covered by the claims, not to the territorial scope of the agreement. Therefore, the licence would also include foreign countries in which patent protection has been obtained, unless the licence agreement contains some language to the contrary. The right of termination “for convenience” allows a party to terminate the licence agreement for any reason or without justification, without having to prove the existence of an infringement. Termination for convenience generally only applies if there is a permanent payment obligation on the licensee. The licensing agreement usually requires several months between the termination date of the terminating party and the entry into force of such a termination.
Agreements with termination clauses often provide for a payment to the non-resilient party in the event of termination. The amount of such a payment depends on the duration of the termination and will decrease in proportion to the remaining period of the agreement. In deciding whether a licensing agreement should be concluded, the parties should balance the benefits of using licensing as a means of cooperation on disadvantages and use this analysis to compare licensing with other opportunities for cooperation. Clearly, the perspective of a party has an impact on this analysis. In particular, the advantages and disadvantages of the taker are different from those of the licensee. The main drawback of in-licensing is that it can cause the licensee to become technologically dependent on the licensee, which could create a lot of problems when it comes to renewing the license. The licensee could use its leverage to negotiate better terms. Or if another party offered more money to the licensee in exchange for an exclusive license, the licensee could refuse to license the technology to the licensee. Even if the licence is an indeterminate licence that should not be renewed, the licensee remains threatened.
The licensee could license the same technology to one or more of the licensee`s competitors, giving it the same competitive advantage as the technology offers the licensee. In addition, the licensee would not be able to maintain or update the technology, which will reduce its value. The licence agreement is either indefinite or fixed the period during which it is effective, i.e. the term. However, for a variety of reasons, one of the parties may have the right to leave the relationship before the deadline expires. This right – the right to terminate – is present in several forms. For licensees, the main advantage of a license (usually called a license-in) is that it allows the licensee to use a proven technology in his business against payment of the fee, instead of bearing the full development and maintenance costs of the technology. If the activity of the taker is relatively complex and includes a variety of different technologies, which would be difficult and costly for the taker to develop himself, the taker will probably need a series of “license-ins”.
From the licensee`s point of view, a license is called a “licence-out.” The main advantage of an out-of-licence is that it allows the licensee to get a return on their technology without bearing the costs of producing, marketing, distributing and selling a product.