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Q.What are the essential terms in a license agreement?

A.A license gives one or more persons the right to use someone elseís asset(s). A License Agreement spells out the precise terms of those rights and the corresponding obligations. Common examples of a License Agreement are Trade Name License, Trademark License, Copyright License, Patent License, and Software License agreements. When you buy a software product, you only buy the right to use the software in limited ways ó you donít buy "ownership" of the software. If you are negotiating to obtain a license as the licensee, or if you find yourself in the situation of providing a license as a licensor to someone else, the License Agreement should address the following key points:

  1. Exclusivity/Nonexclusively: The license can be exclusive or nonexclusive with respect to territory, purpose, and/or time.

  2. Term: The license should set forth the length of the license, plus any renewal rights.

  3. Payment: The license must clearly state how and when upfront payments and any periodic payments are required to maintain the license.

  4. Restrictions on use of the license: The license should set forth any and all restrictions on use of the license, e.g., geographic areas, designated purposes, number of licensees, etc..

  5. Warranties: The licensee should contain a statement that the licensor actually owns the licensed item and it does not infringe on the rights of any third parties.

  6. Termination: The license should set forth the various circumstances upon which the Licensor may terminate the license early, e.g. failure to pay royalties on time.



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