The conventional wisdom is that arbitration is faster and cheaper than litigation. This may or may not be true in a particular case, especially in a case involving patents on complex technologies. See e.B. Deprenyl Animal Health, Inc.c. Univ. of Toronto Innovations Found. (Fed Cir 2002) 297 F3d 1343, 1358 (Order to stay declaratory action in favour of Canadian arbitration proceedings concerning a patent license agreement 2 years after the commencement of arbitration). See also Sanofi-Aventis Deutschland GmbH v. Genentech, Inc. (Fed Cir 2013) 716 F3d 586, see below (confirmation of rejection of the application for an arbitration order for patent license agreements more than 4 and a half years after the commencement of arbitration). Of course, litigation – especially patent litigation – before the courts of first instance and appeal can drag on for years and cost customers dearly.
In addition to providing a detailed description of all parties involved, the license agreements detail how parties are authorized to use real estate, including the following parameters: An example restaurant license agreement would be if a McDonald`s franchisee has a licensing agreement with McDonald`s Corporation that allows them to use the company`s branding and marketing materials. And toy manufacturers regularly sign licensing agreements with movie studios, giving them legal authority to produce figurines based on the popular similarities of movie characters. The bargaining power of both parties to a licensing agreement often depends on the type of product. For example, a film studio that licenses the likeness of a popular superhero to an action figure creator could have significant bargaining power in this negotiation, as the manufacturer is likely to benefit enormously from such an agreement. The film studio therefore has the leverage to take its business elsewhere if the manufacturer is cold on its feet. Those entering into a licensing agreement should consult a lawyer as there are complexities that are difficult to grasp for those who do not have a thorough understanding of intellectual property law. Licensing agreements are often used for the commercialization of technologies. Parties who have chosen to designate California law as the choice of law for their license agreement should also be aware of the so-called Section 1542 waiver. Article 1542 of the Civil Code states that decisions such as Quanta and Cascades show that any attempt to exclude certain customers or downstream users of a licensed technology is likely to fail. However, other types of restrictions, such as the scope restrictions maintained in General Talking Pictures and the separate licenses for complementary but not identical inventions described in Helferich, remain viable options, but are being carefully considered by the courts in light of recent legal trends. The first part of this article focuses on the tension between licensors and licensees when it comes to negotiating the scope of an intellectual property license and the protection of business partners, suppliers and downstream users of a licensed technology. The second part deals with dispute settlement and indemnification clauses.
While the choice of location, law, and rules of procedure governing disputes under an intellectual property license may seem insignificant compared to basic commercial terms such as the scope of the license and royalties, they have serious implications if a dispute arises about the license. Not only do they restrict how a litigant can defend their client`s rights under the agreement, but they can also have a substantial profound impact on the outcome. Finally, the third part of that article deals with the exclusive trade provisions that may be used in the context of intellectual property licensing in order to increase market share and fend off competitors. In a number of circumstances described below, licensors may include these types of provisions with minimal risk. Contestability (or lack thereof) may be precisely why parties to license agreements choose a dispute through arbitration or vice versa. Licensors requesting royalties may be more interested in a decision based on the shares of a particular case. You may prefer a single arbitrator to a panel of three arbitrators, believing that a panel is less likely to make an action-based decision. You may not want the arbitrator to make a reasoned award so that he or she does not provide a court with reasons to set aside the award later. Licensees may want the opposite of these factors. It is important that the client understands what position they are likely to be in when a dispute arises and what they want then.
These considerations should play a major role in the choice of dispute rather than arbitration. After a jury trial nearly a decade after the relevant agreements were finalized, the court concluded that there was sufficient evidence to support the jury`s findings that Eaton`s conduct violated Sections 1 and 2 of the Sherman Antitrust Act (15 USC §§ 1-2) and Section 3 of the Clayton Antitrust Act (15 USC § 14). However, the court did not award damages after rejecting the plaintiff`s expert testimony and rejecting a request to amend the report. 696 F3d to 267. On appeal, the Third Circuit upheld the trial court`s decision that the jury`s verdict was sufficiently substantiated. In upholding the jury`s decision, the court noted that, given Eaton`s size, loss as a supplier was «not an option» for OEMs and were therefore forced to accept things they might have avoided otherwise. 696 F3d to 278. For example, Eaton could require OEMs to remove competing products from the list of data books, although this is unusual in the industry and detrimental to OEM customers, according to the evidence in court. 696 F3d to 277. In addition, it is «unprecedented for a supplier» to block more than 85% of the market with contracts of at least 5 years. 696 F3d to 287.
This, combined with the other factors, left no room for significant competition, and was therefore «the rare case where exclusive trade would pose a threat to competition». 696 F3d to 285 (citation omitted). No other clause in a license agreement has a more obvious impact on a litigant`s work than a dispute resolution clause. When disputes arise, the dispute resolution clause can have a profound impact on a party`s ability to defend its rights under a license. Similarly, the indemnification clause may shift the risk to better protect the licensee or licensor from third party claims and other potential damages. Despite these implications, these clauses are often overlooked when drafting and negotiating because they appear less important than basic business terms such as the scope of licensed rights and royalties. When drafting, licensors and licensees should take the time to consider the types of disputes that may arise under the license, which forum and law are best suited to resolve such disputes, and which party should bear the risk of defending the licensed activities against third-party claims. . .