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Avoiding Common Misperceptions and Mistakes in Patent License Agreements

By Jonathan Gordon and Michelle M. LeCointe
December 01, 2003

Negotiating and drafting the terms of a patent license can be difficult, contentious, and time consuming, especially when the parties are in a hurry to proceed with the broader business venture of which the license is but one part. However, those who decide to skip or skimp on the troublesome details of license drafting will often later face the consequences of a poorly thought-out license relationship ' consequences that are significantly more troublesome and costlier than the burden of thoroughly and accurately documenting the intended terms of the relationship at the outset. Even more frustrating is the experience of drafting a license that diligently attempts to address the business or legal issues thought to be important at the outset of the license relationship, only to discover later that a crucial (but possibly latent) problem was overlooked or inadequately addressed.

Many problems and pitfalls relating to patent licenses can be averted by consulting an attorney skilled in patent transactions prior to agreeing on definitive license terms. Moreover, having an attorney that has a thorough understanding of the types of problems that frequently arise in patent licenses can place a party at a considerable advantage in the important initial deal proposal and licensing negotiations ' well before preparation of a final license for execution. A party can thus take steps to ensure from the outset that the final license will take into account the issues that are likely to be of most concern to that party.

An understanding of common licensing pitfalls is not simply a means by which one party can secure a tactical advantage or win a lopsided license solely in his favor. Indeed, one of the benefits of awareness of potential patent license problems is in avoiding situations in which license terms, initially negotiated without an eye toward their practical workability, when placed in context, become so manifestly unworkable that both parties will ultimately have to accede to their revision ' revision that may be to the detriment or delay of the parties' business relationship.

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