License law

The license agreement is a contract in which the owner of a certain right grants a third party rights to use this right. The contract specifies the extent to which and the manner in which a right may be commercially exploited and used by the licensee and what consideration the licensee must provide for this.

A license agreement must always be concluded as soon as the owner of a right wishes to retain it but at the same time wishes to transfer individual usage and exploitation rights to a third party.

License agreements can be concluded for a wide variety of different rights. Most license agreements concern industrial property rights such as trademarks, patents, designs or utility models. Copyrighted works are also often the subject of license agreements. Otherwise, contracts are also possible for know-how, databases, trade secrets, methods and much more.

The license agreement grants a third party the right to exercise individual usage and exploitation rights without being the owner of the licensed right themselves. There are many different ways in which a license agreement can be designed in order to appropriately capture the interests of the licensor and licensee in each individual case. For example, a distinction is made between exclusive licenses on the one hand and simple licenses on the other. With the former, the licensee receives an exclusive right (e.g. you are the only authorized dealer in Germany), with simple licenses you have to tolerate others being granted the same right and thus even being able to compete with you.

If the rights to use a protected object have been acquired, the protected object may only be used to the extent specified in the license agreement. License agreements must also be differentiated as to whether and to what extent they grant the licensee exclusivity, or contain a temporal, spatial or material limitation. Consequently, when using the protected object, it must be taken into account whether the rights are temporal or spatial and whether they only include a certain product category, such as toys or clothing.

The remuneration of a license agreement is based on different models. Common models include unit licenses, sales licenses, flat-rate licenses, profit licenses, upfront payments, etc.

There are no uniform rules for the design of a license agreement. Consequently, such an agreement can and must be tailored to the individual needs and requirements of the respective contracting parties. However, the freedom of design that this provides also has its downside: rules are often concluded without thinking, which in the event of a dispute can lead to unforeseen and often costly surprises.

There are a number of points that must be regulated in a license agreement in a way that is fair to all parties. To name just a few:
• Description of the licensed object
• Information about both contracting parties
• License model
• License fees
• Liability and warranty
• Regulations regarding contract duration and termination

Further points of the contract always depend on the individual case. They are based on the individual needs and requirements of the contracting parties.

There are many templates for license agreements on the Internet. In our experience, however, these do more harm than good. With license agreements, it is crucial to find solutions that are tailored to individual situations. This cannot be done using a standard template. You only realize what a good license agreement is worth when there is a dispute, i.e. when you no longer get along. Anyone who has thoughtlessly entered into an unsuitable agreement usually has to pay dearly for it.