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Brief on licensing agreements

Karolina Gabriel

What is a license agreement?

A license agreement is a contract during the term of which the licensee can exercise the rights indicated in the agreement in a certain way. The licensor’s rights remain with the creator.

In certain cases we may also deal with an exclusive or non-exclusive license. A license may authorize the licensor to grant multiple licenses in a specific field of exploitation.

The licensee may use the subject matter of the license agreement immediately upon signing the license agreement in return for payment of a specified license fee (remuneration).

Fields of use

The license agreement should specify the fields of exploitation.

Fields of exploitation are ways of using a work, e.g. printing copies, recording, selling, renting or very important nowadays – making a work available in such a way that everyone can have access to it at a time and place chosen by them. The fields of exploitation are specified in art. 50 of the Act on Copyright and Related Rights.

It is very important to define any fields of exploitation in as much detail as possible to avoid any future problems and restrictions.

Also, the contract cannot use the specification of fields of exploitation which are unknown at the time of its conclusion.

Termination of the licence agreement

If the contract does not state otherwise, and the license has been granted for an indefinite period of time, the creator may terminate it with the contractual terms, or in the absence of such terms, one year in advance at the end of the calendar year.

If a license is granted for a period longer than five years, it shall be deemed to be granted for an indefinite period of time thereafter.

When specifying the notice periods, from the licensee’s point of view, it is very dangerous to conclude a contract for an indefinite period without specifying the rules for its termination.

According to the law, if the license has been granted for 5 years, the contract expires after 5 years. The law does not provide for the possibility of its termination. However, there is a possibility to use the principle of freedom of contract formation; the parties to the contract may form appropriate notice periods, e.g. one year’s notice at the end of a calendar year.

Licence fee

The parties are free to determine the amount and form of royalties. The fee may be paid on a one-time basis, as a recurring fee or create two forms of fees.

Depending on your perspective, a one-time fee may be less beneficial to both the Licensor and the Licensee.

The licensor, by indicating a one-time license fee, has to reckon with a one-time fee when establishing a non-exclusive license. From the Licensee’s perspective, it is only a single fee, but there is always the risk of ceasing development and having no incentive to develop and improve the software.

In the case of periodic payment, which is paid on an ongoing basis, the Licensor ensures the development of software, has a steady income from fees, has the possibility and desire to develop, has an incentive to improve the software, and thus ensures the longevity and continuity of the agreement. However, there is always a risk of non-payment due to e.g. worse financial situation of the Licensee.

Exclusive and non-exclusive licence

An exclusive license is a license in which the licensor agrees not to license others in a particular field of use. In this case it is very important to correctly specify the fields of exploitation. This type of license should also be concluded in writing under pain of nullity. In this type of agreement it is also possible to include a provision that the licensor agrees not to use the work within the scope covered by the license agreement.

A non-exclusive license is a license in which the licensor is not limited by the license granted in a particular field of exploitation, and therefore may also license others to use the work to the same extent. Under this type of license, it is not necessary to conclude a written agreement – it may be oral, written, or other form.

Additional contractual provisions

Other optional provisions, e.g. those providing security for the licensee or licensor, may also be included in the contract. These include e.g. liability for legal defects of the work, provision of guarantees.

The final stage of the contract includes the final provisions, including provisions on the possibility of amendments to the contract and their rigor (nullity), information on copies, the competent court, the procedure for settling disputes, the application of laws and other possible provisions.

As you can see, a license agreement can be a very detailed and elaborate agreement. The agreement helps to regulate and secure many issues, both on the part of the Licensor and the Licensee.

This article provides only a brief description of what such an agreement is and what the basic elements may be.

If you have any questions feel free to contact me.

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