A Patent License Agreement grants rights to use, manufacture, or sell an invention covered by a patent. This playbook focuses on negotiating royalty structures, field-of-use restrictions, and ownership of improvements.
Why This Matters: Clear termination clauses preserve strategic flexibility, prevent stranded assets, and reduce the risk of sudden loss of critical IP rights.
Negotiation strategy
If you're the Licensor:
Negotiate for a longer initial term with favorable renewal terms to ensure continuity and stability. Include specific exit rights to protect IP and confidential information.
If you're the Licensee:
Aim for shorter initial terms with flexible termination options to allow for strategic pivots. Ensure that termination for convenience is balanced with adequate notice periods.
Essential elements
1
Initial Term
Duration of the initial agreement.
2
Renewal Terms
Conditions for automatic renewal.
3
Termination Triggers
Specific events leading to termination.
Action framework
ACCEPT
Propose edits when the initial term or renewal terms do not align with strategic goals.
EDIT
Reject clauses that lack clear exit rights or impose unreasonable termination conditions.
ADD
Add language to cover specific termination triggers like insolvency or regulatory changes.
PRO TIP
Always ensure termination clauses are aligned with your business's strategic objectives and risk management policies.
Example clauses
FAVORABLE
Preferred Term of Agreement
"The initial term of this Agreement shall commence on the Effective Date and shall continue for a period of three (3) years, unless earlier terminated in accordance with the provisions of this Agreement."
NEUTRAL
Standard Renewal Clause
"Upon the expiration of the initial term, this Agreement shall automatically renew for successive one (1) year terms unless either party provides written notice of its intent not to renew at least ninety (90) days prior to the expiration of the then-current term."
UNFAVORABLE
"Termination rights are subject to mutual agreement without specified notice periods or conditions."
High-Risk Projects
Fallbacks
Long-Term Partnerships
For long-term partnerships, focus on renewal terms that allow for periodic review and adjustment to align with evolving business needs.
Technology Transactions
In technology transactions, prioritize exit rights that protect IP and ensure smooth transition of services upon termination.
Licensing & IPPlaybook Template (Pro both parties )
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