3 Things You Should Know About Exclusive Licensing

It is not often that there is a reported case for expansion stage companies that specifically addresses an exclusive software license, so I thought I would share 3 takeaways from this 2011 exclusive software licensing case (HyperQuest vs N’Site Solutions). This case identifies something all companies looking for expansion capital should know about.

I will definitely not bore you with the long and detailed facts in this case, so let’s get to it.

Key Takeaways:

1) If you want copyright law to protect you, then use copyright wording in your exclusive license grant.

• Ok, that was a mouthful, so let me explain. There are generally 6 exclusive rights a copyright owner has (i.e. reproduce, distribute, create derivative works, publicly display and perform, etc.) and these rights need to be used or referred to in the license grant if you want to seek protection under the copyright act.

2) If too many rights are retained, then you may not receive an exclusive software license.

• This actually happened in this case, as the court decided that too many rights were retained by the grantor for an exclusive license to be granted. This makes a lot of sense. If a party says I grant you an exclusive license but then retains rights that are inconsistent with exclusivity, then the exclusive license should not work.

3) Typically exclusive licenses are granted for certain territories, fields of use, or media.

• Yes, typically exclusive rights are granted for certain territories (i.e. US only), fields of use (i.e. for only the insurance industry), or media (i.e. print) so think of drafting them this way.

So next time you are working on an exclusive software license, you may want to review this case and think about how the drafting of the exclusive license grant really matters. Oh yea, these are the kinds of things I discuss with the OpenView portfolio of expansion stage companies.

Reference:

Full Case on Google Scholar.

Disclaimer: This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.