- What is a license?
A license is an agreement in terms of which a holder of a right allows a third party to use that right, in return for some form of remuneration. The remuneration may take the form of a royalty, a lump sum payment or some combination. Whether the mode of technology transfer consists of a conventional license or the establishment of a new company, the instrument for transferring the technology will be a license agreement in both cases.
- CSIR license term sheet
Prior to embarking on license negotiations, a term sheet should be drawn up, setting out the proposed license terms and parameters, which are to be approved by the Executive Management Committee.
- Key terms of a license agreement
- Licensed Technology – must be properly defined in terms of relevant patents/patent applications, know-how and tangible property (eg software, datapack, etc)
- Scope of Licensed Rights – what the licensee is entitled to do with the licensed technology (eg make, sell, use, import, etc), and whether this is on an exclusive or non-exclusive basis
- Field of Use – which field/s or sector/s the licensee may operate in
- Territory – which countries the licensee may operate in
- License term – how long the licensed rights will remain valid (in the case of patented technology, this is typically the life of any relevant patents)
- Consideration – license fees may take the form of a lump sum payment, staged payments, running royalties calculated on a stipulated base (eg net sales), milestone payments, etc – or any combination of these. An equity stake in the licensee company may in certain circumstances be taken as all or part of the license consideration
- Diligence provisions – to ensure performance on the part of the licensee (especially important in the case of exclusive licensing)
- Sub-licensing – is it permitted and under what conditions
- Prosecution and maintenance of IPRs – whether the licensor or licensee is responsible for decision-making and payment
- Infringement and enforcement of IPRs – who is entitled to take action against infringers and how will any proceeds realised be shared?
- Improvements – who owns the rights to improvements made by the licensee (if permitted)? And does the licensee have access to improvements made by the CSIR (and if so, on what terms)?