Quick Overview
What a License Agreement Should Include
- Parties to the Agreement: who grants the license and who receives it.
- Subject matter of the license: for example, a specific photograph, text, software, trademark, or other right.
- Method and Scope of Use: what the licensee is permitted to use the subject matter of the license for, in which territory, for how long, and, if applicable, in what quantity.
- Exclusivity: whether anyone else may obtain the same rights.
- Compensation: the amount, method of calculation, or an explicit provision stating that the license is granted free of charge.
The essential elements of a license agreement must always be assessed based on what the specific license pertains to. Different provisions will be important for a photograph on a website than, for example, for a trademark license.
Do you need a license agreement that precisely reflects how the work or other right is to be used? An attorney can draft a customized agreement for you or review an agreement submitted by the other party.
What is the purpose of a license agreement?
As we mentioned in the introduction, a license agreement allows you to grant an intellectual property right to another entity—or, if applicable, to several different entities—independently of one another. Some intellectual property rights cannot be “transferred” in any other way. However, in the case of such rights, this does not involve an actual transfer of rights, but merely the granting of permission to another person to exercise the right. Typically, this type of license agreement is associated with copyright, which is one of the aforementioned rights that is intrinsically linked to the author and therefore cannot be transferred. However, the author of a book may grant a license allowing, for example, the creation of a film or a theatrical production based on the book.
Essential Elements of a License Agreement
How should a license agreement be drafted so that it is clear to both parties what the licensee may and may not do? First and foremost, it is necessary to precisely specify the subject matter to which the license applies and the rights the licensor grants to the licensee. It is also advisable to specify in the agreement the scope of the license, its term, the territory covered, exclusivity, compensation, the possibility of granting sublicenses, and the conditions for terminating the agreement.
However, not all of these details constitute essential elements of a license agreement in the sense that the agreement would not automatically come into effect without their explicit stipulation. For certain matters, the Civil Code provides supplementary rules. However, a precise definition directly in the agreement is important to prevent future disputes over what the licensee was actually permitted to do with the subject matter of the license.
The basic elements of the contract naturally include the identification of the contracting parties. On one side is the owner of the intellectual property right, and on the other is the licensee, who obtains the right to use the work. It is also essential to specify the term of the agreement (limited to the duration of the copyright) and to indicate whether the work in question is musical, dramatic, photographic, cinematographic, visual, or of another nature.
The license agreement should specify the scope of the licensee’s rights and obligations, particularly whether the licensee is authorized to make full use of the work or, alternatively, only to reproduce, distribute, rent, lending, exhibiting, or communicating the work to the public, for example, via radio or television. The scope of the license may be limited or unlimited. It can be expressed in terms of time, location, or quantity. A common issue is whether, for example, a film or book may be distributed worldwide or only within a specific territory. The scope must be specified, at least in general terms. In addition, it should be specified whether the licensee may modify the work, combine it with another work, or include it in a compilation, such as a collection of poems or a songbook.
The legal framework for such agreements is set forth in the Civil Code. It also contains special provisions regarding licenses for rights protected by copyright law, rights related to copyright, and publishing licenses.
A license agreement does not necessarily have to be in writing, but doing so is highly recommended. This will help you avoid any uncertainty regarding the specific scope of the agreed-upon rights, compensation, or any other terms. In two cases, the law mandates that the agreement be in writing: first, if it is an exclusive license; and second, if registration in a public registry is required for the license to be effective against third parties, as is the case with the licensing of industrial property rights.
A license may also be negotiated as an “exclusive” license. This means that the author may not enter into another license agreement with any other person, nor may the author personally exercise the economic copyrights granted to the licensee. In this case, the agreement must be in writing. As a general rule, however, the license is non-exclusive. If an exclusive license is to be granted, this must be expressly stated in the agreement. The only exception is a publishing license, where the law stipulates that, unless the parties agree otherwise, the publishing license is exclusive.
It is also possible to enter into a preliminary agreement with the author regarding a license for a work that has yet to be created. This typically occurs when commissioning a sculpture or painting, or when planning to publish all future sequels to a successful book.
From our experience: A common problem with license agreements is that the scope of the license is described too broadly. For example, the parties may agree to “use of a photograph for marketing,” but fail to specify whether it may also be used on social media, in paid advertising, in printed materials, or whether it may be further modified. It is precisely such details that can later determine whether the licensee has exceeded the scope of the license.
How to Determine Remuneration
A license agreement is a contract for consideration. It must specify the amount of the author’s compensation, or at least the method for calculating it. If the remuneration depends on revenue from the use of the license, the author has the right to inspect the documents used to calculate the actual remuneration; for example, the author may review paid or unpaid invoices. However, the agreed-upon remuneration does not necessarily have to be in the form of money. Remuneration may also be provided in kind; in such cases, the agreement takes the form of a so-called barter agreement.
In certain cases, the contract may be entered into free of charge, such as when a photographer assigns their rights to a charitable organization or, under certain conditions, to the public (e.g., Creative Commons). If the contract involves a trademark or patent, the fact that it is free of charge must be explicitly stated in the contract.
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Tip for article
Tip: Many of us deal with copyright on a daily basis—whether we’re creating our own works or working with others’ works. What rights do you have as an author, or conversely, as a licensee? And what must a license agreement include? You’ll find answers to the most important questions about copyright in this article.
How to Terminate a License Agreement
An indefinite-term agreement may be terminated with one year’s notice, effective at the end of the month in which the notice of termination is received by the other party. Fixed-term agreements generally cannot be terminated, except in the event of a material breach by one of the parties.
An exclusive license agreement may be rescinded if the licensee does not use, or uses insufficiently, the license, resulting in no or only minimal income for the author. Rescission voids the agreement from the outset. The parties must therefore return whatever they have already performed.
If you intend to enter into a license agreement, be sure to check whether it is exclusive or non-exclusive, and whether it is for a fixed or indefinite term. These distinctions affect the termination provisions, the scope of the licensee’s rights, and the method of determining compensation. We recommend having a custom-drafted agreement prepared, as every work is unique in some way, and it is essential to perfectly reflect the specific circumstances in the agreement to avoid complications such as penalties (contractual fines and liquidated damages) or lost profits. A license agreement template downloaded from the internet may not reliably protect your rights, whether you are the author of the work or the party seeking to use it.
Tip for article
Tip: The field of intellectual property law has undergone turbulent developments in recent decades. Illegal copying of software, unauthorized use of others’ photographs, and the distribution of music albums or other copyrighted works are just a fraction of what we encounter in the Internet age. We will now focus on one of the most common phenomena—downloading and sharing music and movies.
When it comes to a license agreement, the details matter. A license that is too broad can deprive the author of control over how the work is used, while one that is too narrow may not allow the licensee to use the work as needed. Have a lawyer review the agreement before signing it, or have it drafted specifically for the intended use of the license.
Summary
A license agreement specifies how the licensee may use another party’s work or other intellectual property right. When drafting it, it is essential to precisely define the subject matter of the license, the methods and scope of use, exclusivity, the term of the license, and the terms regarding compensation or free use. It is also advisable to address the possibility of sublicensing, modifications to the work, and termination of the agreement. While the law can resolve certain issues in the absence of specific provisions, relying on its default rules may lead to disputes. Therefore, a license agreement should always correspond to the specific manner in which the subject matter of the license is actually to be used.
Frequently Asked Questions
Can I enter into a license agreement via email?
Yes, unless the law requires written form in a specific case. However, to be able to prove the terms of the license at a later date, it is advisable to have its contents recorded in writing.
Can the licensee grant a license to someone else?
A sublicense may be granted if the license agreement permits it. It is therefore advisable to explicitly address this issue.
Can the license be transferred to another person?
The transfer of a license is subject to its own legal conditions and may require the provider’s consent. The specific procedure also depends on the type of license.
What if we do not specify in the contract the territory in which the copyrighted work may be used?
The Civil Code contains supplementary rules for certain missing details. Nevertheless, it is safer to explicitly agree on the territorial scope.
Can I license a work that doesn't exist yet?
Yes, it is also possible to address a future work in a contract. However, it is important to specify clearly what the future license will cover.
