The essence of a licence is usually reflected in one key licence provision and, if necessary, elaborated in subsequent clauses. In the licence clause, probably more than in any other type of agreement, the key elements of the agreement are identified.
Subject to the terms of this Agreement, Licensor hereby grants Licensee, and Licensee hereby accepts a perpetual, non-exclusive, royalty-bearing licence, without the right to grant sub-licences, to use the Licensed Trademark in the Territory in connection with Licensed Products only.
The licence provision contains the following elements:
- Licence grant. The wording reflects the grant of licensed rights (“hereby grants”, “hereby accepts”). The word hereby is essential since it prevents that an additional written licence grant must be signed (as is typically required in connection with intangible rights);
- The licensed object. For example a trademark, patent, copyrighted work, know-how, software;
- The scope could include:
- type of use (e.g. manufacture, import, export, market, sell, distribute, use);
- territory restrictions (this could be a specified region, country, or worldwide);
- exclusivity (sole or non-excusive);
- market segment restrictions (e.g. fitness-shops, shopping malls, supermarkets, webshop);
- the right to grant sub-licences; and
- duration (perpetual or irrevocable, or a specified time limit).
- Licence fees (i.e. royalty bearing, royalty-free or fully paid-up).
Differentiation in licensed uses. If the licence differentiates for the various uses, the above core licence clause becomes a matrix of several licences, each of which apply to a different scope and each subject to varying conditions. For instance, the above example could differentiate between the types of permitted uses as to degree of exclusivity, geographical reach, right to sub-license and royalty:
Licence. Subject to the terms of this Agreement, Licensor hereby grants to Licensee and Licensee hereby accepts:
(a) a non-exclusive, royalty-free licence, without the right to grant sub-licences, to demonstrate the Licensed Trademark in connection with Licensed Products only; and
(b) an exclusive, royalty-bearing licence, with the right to grant sub-licences, to make and have made the Licensed Trademark in connection with Licensed Products only.
(c) a non-exclusive, royalty-bearing licence, without the right to grant sub-licences, to market, have marketed, offer for sale, have offered for sale, sell, have sold, or otherwise distribute or have distributed, the Licensed Trademark in the Territory in connection with Licensed Products only.
Note that the verb “to use” is omitted in all subparagraphs. Instead, each subparagraph includes a specific type of ‘use’. Item (c) demonstrates that the possible differentiation in licensed uses might be very specific.