Terminating Patent Licenses: Key Considerations and Best Practices

Description

Termination of a patent license may seem straightforward if the license agreement clearly laid out the circumstances under which termination is permitted. However, things are not always as they seem at first blush. For example, what if the license is assigned to the licensor's competitor?

Also, what is the effect on the license if the licensee challenges the licensed patent's validity? And what role do forum selection clauses and “no challenge” clauses play in terminating such licenses? Furthermore, what are the options for the licensee if a licensor declares bankruptcy? Similarly, what are the options for the licensor if the licensee declares bankruptcy?

There are post-termination considerations that should be kept in mind. Some provisions may survive the agreement's termination. Many licenses prohibit the licensee from using the licensed IP after termination, giving the licensor a breach of contract claim in addition to an infringement claim. Further, if the license agreement involves the disclosure of know-how or other confidential information, termination of the agreement may require the return or destruction of the confidential information. The parties should also consider the effect of termination on the licensed products the licensee holds as well as sublicenses. In addition, the license agreement may require obligations with respect to patent prosecution and/or litigation and the effect of termination must be addressed.

Listen as our authoritative panel of patent attorneys examines terminating licenses of patent rights. The panel will address whether, when, and how to terminate a patent license and offer practice guidance to manage the associated risks.