Developers of intellectual property (IP) – such as technology, software, patents, brands, trademarks, or copyrighted materials – may consider monetizing their intellectual assets by entering into a licensing agreement with another party. These agreements allow the licensor to expand the market reach of his or her property without losing control of the asset. The licensee, on the other hand, can seek to profit from the licensor’s intellectual property without investing in its research and development.
What happens if one of the parties breaches the agreement? There are two possible legal strategies to pursue:
- Breach of contract
- Copyright (or patent or trademark) infringement
Each of these legal strategies can result in distinct remedies, including injunctive relief (a court order instructing the breaching party to cease the infringement activity) and monetary damages.
At Hendershot Cowart, P.C., our licensing agreement attorneys have decades of experience helping IP licensors and licensees in Texas protect their rights. To schedule a consultation with our team, contact us online or via phone at (713) 909-7323.
First, the Basics: What Is a Licensing Agreement?
A licensing agreement gives permission to one party (the licensee) to use the intellectual property (such as a brand, patent, software, technology, logo, or trademark, etc.) of another party (the owner or licensor). The agreement will stipulate the conditions of use and the compensation to be paid to the owner, called royalties.
Licensing agreements typically address the following elements:
- Payment or royalties
- When and where the intellectual property can be sold or distributed
- Length of the contract
- Renewal options and termination conditions
- Quality assurance
Examples of Licensing Agreement Violations:
- Licensee fails to pay royalties as agreed
- Licensed material is used after the license expires
- Licensed material is used in an unauthorized manner
- The licensor fails to honor exclusive terms of the agreement
- Licensee allows an unauthorized third party to use the licensed material
Is It a Licensing Breach or Infringement?
The first step in a dispute is to determine whether the matter qualifies as a breach of the contract, an infringement of the IP, or both. Since remedies and damages for license breach and infringement cases can be significantly different, understanding the type of case you have is critical.
While it is not always clear cut, an attorney experienced in contract law can examine whether the licensee or licensor breached a contract covenant or infringed on the license. There are several deciding factors:
- Was the licensing agreement for exclusive or nonexclusive use? When a licensor conveys exclusive use of the IP to the licensee, the courts reason that the licensee holds temporary and limited ownership rights to that IP. Therefore, if the owner of the IP – such as a patent holder or trademark owner – makes use of the licensed material exclusively granted to the other party, the licensee could sue the owner for infringement.
- Which provision of the agreement was violated? Was it a condition of the use of the license, such as the geographic scope or quality of use? This may constitute infringement. Or was it a breach of terms of the contract not explicitly related to the use of the license, such as payment of royalty fees? This would likely be considered a breach of the licensing contract.
How Do You Enforce a Licensing Agreement?
If the licensing agreement was breached, parties may pursue the following remedies:
- Injunction, or other equitable remedy
- Actual damages, such as lost royalty fees
- Cancellation of the contract
- Remedies dictated by the agreement itself, such as arbitration or additional royalties
If the license itself was infringed, offending parties may also face additional consequences:
- Statutory damages, which are damage amounts established by law
- Recovery of attorney’s fees
- And even criminal penalties
At Hendershot Cowart P.C., our contract law attorneys will help you find the best path forward in your patent, technology, or copyright licensing agreement dispute, whether that means pursuing an infringement case or breach of contract. Call (713) 909-7323 or contact us online to schedule a consultation with our team.