AGREEMENT GUIDELINES TRANSFER OF USE [NON-EXCLUSIVE LICENCE]

Transcription

1 AGREEMENT GUIDELINES TRANSFER OF USE [NON-EXCLUSIVE LICENCE] AGREEMENT AG AG AG AG AG AG AG AG AGR GR GR GR GR GR GR GRE RE RE RE RE RE RE REE EE EE EE EE EE EE EEM EM EM EM EM EM EM EM EME ME ME ME ME ME ME MEN EN EN EN EN EN EN ENT NT NT NT NT NT NT NT GUIDELINES UI UI UI UI UI UI UID UID UID ID ID ID ID IDE DE DE DE DE DE DE DEL EL EL EL EL EL EL ELI LI LI LI LI LIN LIN LIN IN IN IN IN INE NE NE NE NE NE NE NES ES ES ES ES ES ES ES

2 1 Contents CONTENTS... 1 INTRODUCTION PARTIES PURPOSE DEFINITIONS THE LICENSOR S MAIN OBLIGATIONS THE LICENSOR S OTHER OBLIGATIONS The Licensor s right to dispose of the Invention The Licensor s access to transfer to other Licensees The Licensor s access to use the Invention The Licensor s modifications and further development Non-fee use Negotiations Licence THE LICENSEE S FINANCIAL OBLIGATIONS LICENCE FEE MINIMUM LICENCE FEE THE LICENSEE S OTHER OBLIGATIONS Marketing Transfer Subcontractors Sub-licence Other transfer The Licensee s modifications and further development Cross licensing The Licensee s improvements taken to be the Licensee s as a starting point The Licensor s right of first refusal to the Licensee s improvements Ban on modifications BREACH COMPENSATION AGREEMENT PERIOD AND NOTICE OF TERMINATION FORCE MAJEURE INSURANCE CONFIDENTIALITY INFRINGEMENT OF THE INVENTION INFRINGEMENT OF OTHERS RIGHTS AUDIT LEGAL VENUE... 17

3 18. APPLICABLE LAW Introduction The purpose of these guidelines is to support the use of the associated model agreement for trade in IPR. The guidelines expand on and explain the various clauses of the agreement. The guidelines also contain proposals for a number of alternative solutions when special circumstances may advocate deviation from the agreement template. It must be emphasised here that the agreement is only intended to be a model which in all cases must be adapted to the specific circumstances of a given project. Finally, it must be noted that the guidelines are not exhaustive and should not be considered a replacement for professional advice. The agreement and these guidelines can be used in several ways. The company can use the agreement directly as a basis for negotiations, as a source of inspiration when drawing up a separate agreement or as a checklist when the other party is responsible for producing the first draft agreement. Transfer of ownership or use simple or exclusive right? In their selection of an agreement type, the parties have the option of choosing between different transfer models. The decisive factor in this choice is first and foremost whether ownership is transferred (agreement A), meaning the Licensor loses any right of disposal over the Invention, or whether the transfer only covers use (agreement B or C). The decisive factor, whether it is a question of a transfer of ownership or transfer of use, will be whether all ties to the transferor are severed when the agreement is concluded. Transfer of use is also referred to as a licence being bought/granted for use of the Invention for a specific period. With regard to a transfer of use, a position must also be taken on whether the Licensor grants the Licensee a non-exclusive licence (agreement B) or an exclusive licence (agreement C). With regard to transfer of ownership, the Licensee acquires all rights to the Invention including the right to decide on the waiving of the right and subsequent reassignment and also the right to ban third parties from carrying out actions which infringe the exclusive right to the Invention. With regard to transfer of use, the Licensee acquires only the right to dispose of the Invention in the manner and within the agreed period of time described in the agreement and if necessary also only within a specific geographic area, see section 3 for details on this. A principle of

4 3 restrictive interpretation likewise applies, which means that it is only the explicitly allocated right of use to the Invention which can be claimed by the Licensee. The choice between transfer of ownership and transfer of use will thus also depend on a great number of financial aspects, including a desire to have the payment made once and for all, the possibility of finding a basis for setting a purchase price, the possibility of indicating the size of a licence fee or the income basis on which the licence fee will be calculated at an early stage, or a desire to restrict the rights of the company in time or geographic terms.

5 1. PARTIES 4 It is important that the parties are specified correctly. The parties to the agreement should be specified by listing their full names and addresses. If it is a question of a company, the company s current CVR number should be specified in the agreement since this number provides an accurate identification of the company. This may be crucial if the party in question is part of a major group of companies so that it can be clearly established with which of several subsidiaries (perhaps with very similar names) the trade is taking place. If it is a question of a natural person, the CPR number or equivalent will ensure that identification is adequate. 2. PURPOSE The agreement should contain an introduction which clarifies the purpose of the project and the conditions which form the basis of the parties involvement. The project should be described as precisely as possible. A more technical and detailed description of the project should be included, but it may be possible to refer to already prepared project descriptions that can be enclosed as appendices to the agreement. Furthermore, the parties conditions for and purpose behind entering into the agreement must be described. It should be clear why it is these particular parties who are entering into the agreement. Such a description of purpose will ensure that the parties thoroughly consider and discuss their different expectations for the project, thereby enabling the prevention of subsequent conflicts. It is important to be aware that, regardless of whether many purpose clauses take a different form than the more specific agreement clauses, they will in the event of a conflict constitute a contribution to the interpretation of the understanding of the rest of the agreement. Consequently, they must be drawn up with as much care as the other clauses of the agreement. 3. DEFINITIONS The agreement should contain definitions of important terms. This will then ensure that these terms are understood in the same way by the parties to the agreement. Important terms is taken to mean e.g. Confidential Information (which information is confidential?), Knowledge of the Parties (within which area and at which time?), the Product, the Area, etc. A choice can be made as to whether to write the terms defined in section 3 of the agreement with an initial capi-

6 5 tal in the agreement out of consideration for precision. A similar choice can be made with regard to whether the agreement refers to the Licensee and Licensor with initial capitals. To the extent the parties agree that the Invention is to be transferred for use, the Licensee s use of the Invention can be restricted to a more defined Area. Area is normally taken to mean a physical territory which is defined by the parties inserting a precise description of the relevant geographic area in the definitions section. However, the Area can also be defined as a right to use the Invention within e.g. the food industry or for the purposes of producing semi-conductors. In this way the Licensee acquires a non-exclusive right to sell in the defined Area and the Licensor can continue to freely transfer the Invention to other Licensees within the same area. The definition of the Invention will be easy in cases where at the time the agreement was entered into a patent application or utility model application had been filed, since reference can simply be made to the relevant patent, utility model application or registration number. The parties should make sure to extend the definition to also include e.g. subsequent patents and to provide information on patent applications that may take priority over the application in question. If, at the time the agreement is entered into, such an application or registration has not been filed, we recommend advice be sought before the agreement is concluded since it may be appropriate to describe the Invention in much more detail. 4. THE LICENSOR S MAIN OBLIGATIONS It is important that the agreement covers the extent of the Licensor s obligations since any subsequent doubt could lead to a serious conflict between the parties. It is extremely important to have it spelt out clearly whether the licence is exclusive or non-exclusive (the latter is selected as the starting point for the agreement), as well as which restrictions apply to the Licensee s specific use if it is a question of a non-exclusive license. As mentioned above, with a non-exclusive licensing agreement the Licensor grants the Licensee a right, but not an exclusive right, of use to the Invention for a purpose described in detail. This could, for example, be defined in relation to geography, sector, industry, be associated with a specific product or similar. The Licensee thus only has the right to use the technology within the area specifically agreed and in the manner specifically agreed. Unlike with the exclusive license, the Licensor retains the right to use or grant other Licensees the right to use the Invention within the same geographic area or business area, cf. section 5.2.

7 5. THE LICENSOR S OTHER OBLIGATIONS The Licensor s right to dispose of the Invention The Licensor must guarantee that he owns the exclusive right to the finished Invention, this being a prerequisite for the Licensor actually being entitled to transfer the Invention. If the Licensor does not own the right himself, this may mean that the Licensee will not acquire the presumed right of ownership and the foundation for the Licensee s production or business based on the Invention will disappear if a third party can claim justified opposition. In these situations the agreement allows the Licensee to cancel the agreement. The Licensee should be aware of whether the Invention (typically a filed or registered patent) is dependent on another patent, e.g. because the Invention is an improvement of or a new form of use for a previous invention for which someone else holds the patent. If this is the case, the Licensee should find out about the circumstances and if necessary seek advice to ensure that the transfer of the Invention also covers the right to use such underlying rights which are essential to the continued use of the Invention. As a general rule, the Licensor is responsible for ensuring that the right exists and is registered on the markets where the Licensee is acquiring rights. Even if the obligation is incumbent on the Licensor, the agreement does not contain any guarantee that the patent cannot be declared invalid. Instead the agreement allows the Licensor to provide a declaration that the rights of which the Licensor is aware do not conflict with the rights of others. 5.2 The Licensor s access to transfer to other Licensees This clause deals with the Licensor s opportunity to transfer the Invention to other Licensees. As a starting point, the agreement entitles the Licensor to not only transfer ownership of the Invention while there is a licensing agreement with the Licensee (naturally in compliance with the terms of the licensing agreement) but also to grant licences to the Invention to other Licensees. 5.3 The Licensor s access to use the Invention With an agreement on the transfer of a non-exclusive licence, as a starting point the Licensor is not prevented from using the Invention in competition with the Licensee, but of course this can be arranged if the parties can reach an agreement on this. Where appropriate a position should also be taken on whether the Licensor will still be entitled to grant licences to other parties (possibly in the Area).

8 7 5.4 The Licensor s modifications and further development Non-fee use The agreement contains a clause on the Licensee being able to use the developments, improvements and similar modifications which the Licensor may create in the subsequent period in which the agreement runs free of charge. Should the Licensor not wish to have these restrictions, the parties can instead use one of the following models in the agreement Negotiations Alternatively the parties can insert a clause on negotiations so that the issue of payment under the agreement can be examined once the new technology has actually been developed. Below you will find a suggestion for the wording which the parties can insert into the agreement: The Licensor will inform the Licensee in writing without undue delay of any developments, improvements and similar modifications that may be created on the basis of the Invention or in association with the Invention during the agreement period. If the Licensee is interested in purchasing the further development or improvement, the parties enter into negotiations on this matter, including agreeing any extended licence and/or renewed payment of the one-off payment, in addition to increasing the annual minimum licence fee No right of first refusal A variant that is less burdensome for the Licensor may take the form of not granting the Licensee a right of first refusal to the improvements to the Invention which the Licensor may make. In such cases the following clause can be used: If, following the transfer, the Licensor makes developments, improvements and similar modifications to the Invention such that new inventions or results arise, the inventions or results in question belong to the Licensor.

9 5.4.4 Licence 8 Finally, the parties have the opportunity to insert a clause stating that the Licensee will be entitled to take out a licence for the further developments and improvements which the Licensor makes in the licence period on the same terms as those which a third party would have accepted. This clause is a so-called Right of First Refusal and assumes that there is an offer from a third party to purchase the improvement which the Licensee must then take a position on within a deadline. This clause establishes a deadline of 14 days after which the right will otherwise apply until further notice and thereby risk blocking the Licensor from entering into agreements with other potential Licensees. If the parties would like such a negotiations clause, the text below could be inserted as an alternative. In cases where there is not an offer or one cannot be acquired from a third party for a right to improvements etc., negotiations must be initiated with the Licensee on the terms under which the Licensee may possibly wish to acquire the improvement. If the parties cannot agree on the terms in such negotiations, it is important that the Licensor is aware that a subsequent offer from a third party will trigger the duty to ask the Licensee if he wishes to exercise his right of first refusal, even if the Licensee has previously rejected the opportunity to purchase the improvement on comparable or almost comparable terms. The Licensee is entitled to take out a licence for such developments or improvements. This right shall be exercised within 14 days of the Licensor submitting written documentation to the Licensee detailing the price and the terms which can verifiably be achieved in the event of a sale to a third party. The offer must contain information on the price and the terms that the third party has offered the Licensor. If the Licensee wishes to exercise the right, this shall take place by means of written notification to the Licensor within the deadline indicated above and in a given case shall do so at not less than the same price and on the same terms which a third party would offer the Licensor. 6. THE LICENSEE S FINANCIAL OBLIGATIONS The agreement directs the Licensee to pay a one-off payment as soon as the agreement is concluded in order to obtain access to use the Invention. The Licensor will have an interest in achieving as large a one-off payment as possible in order to secure capital and increase the Licensee s incentive to use the Invention and thus get the money back on his investment. In most cases the Licensee will be interested in deferring all forms of payment until a real sale has been achieved in connection with the use of the Invention. The proper balance can be found by agreeing a reasonable one-off payment.

10 6.1 Licence fee 9 In addition to the payment of a one-off payment, the parties must agree a regular payment (licence fee/royalty) which is triggered every time the Licensee uses the Invention, typically when products based on the Invention are sold, but it can also be agreed that a monthly fee for instance be paid which does not depend on the specific sale. The regular licence fee is typically set as a percentage of the Licensee s net income from sales of products in which the Invention is embodied (possibly in the area which the licence covers), but other variations can be agreed. There could potentially be a large number of different models detailing how the licence fee is set, so the calculation could also be based on a unit price in cases where a percentage would provide a misleading result. In this way the parties share the risk if the Invention s commercial use does not have the value originally anticipated by the parties. It is difficult to say anything general about the size of the licence fee since it will depend on numerous conditions, including the sector and market conditions, as well as an assessment of the nature and maturity of the Invention. 6.2 Minimum licence fee The clause on the Licensee having to pay an annual minimum licence fee should motivate the Licensee to use the Invention and secure the Licensor a certain minimum income. Alternatively, the parties can opt to adjust the minimum fee in accordance with the net price index. In such cases the following clause can be inserted into the agreement: From the calendar year [insert year], a minimum licence fee of DKK [insert amount] is to be paid annually. The minimum fee is then adjusted on 1 January every year in accordance with the percentage change to the net price index published by Statistics Denmark. The first adjustment will take effect on 1 January [insert year]. The parties are also able to look for a relevant index for the Invention on the Statistics Denmark website.

11 7. THE LICENSEE S OTHER OBLIGATIONS Marketing The agreement imposes the duty to draw up a marketing plan for the products in which the Invention is embodied on the Licensee. The purpose of this clause is to apply a certain amount of pressure on the Licensee so that the Licensor s access to earn income via licensing is not eroded because the Licensee does not put any effort into selling. In such a case the agreement must either be cancelled, if the Licensee does not market the Invention of products in which the Invention is embodied, or the Licensor must grant a license to another Licensee in the Area in order to achieve reasonable sales. 7.2 Transfer Subcontractors The agreement allows the Licensee to use subcontractors in his production of e.g. products in which the Invention is embodied without this meaning that the Licensee is entitled to allow a third party to use the Invention Sub-licence It can be considered whether the Licensee is to be entitled to grant a licence to third parties, a so-called sub-licence. This can be justified by the Licensee wishing to achieve market coverage in other countries than where he has his own operations. If the Licensee is given access to grant sub-licences, sales from these will also benefit the Licensor in the form of greater licence income. The parties can opt to grant the Licensee a right within the framework of the agreement concluded and in compliance with the financial obligations created by the agreement to allow another party to use the Invention via a sub-licence. It should be noted that in doing so the Licensor surrenders an important level of control over the administration of his rights but this, as previously mentioned, may be justified by the prospect of greater sales. The Licensee should be especially aware that agreements which the Licensee enters into with third parties must take into account the fact that the contractual relationship between the Licensee and the Licensor will come to an end at some point. The Licensor should be reluctant to give the Licensee permission to grant sub-licences since it can be difficult to supervise the sales, which can lead to the Licensee easily losing control of who can use the patents as well as losing the opportunity to negotiate and enter into licensing agreements with the Sub-licensees.

12 11 The sub-licence agreement must respect the restrictions that apply under the main agreement. The agreement therefore directs the Licensee to bear the risk of breaches attributable to third party (the Sub-licensee) breaches, including the licence fee not being paid. In the event of the parties wishing for the Licensee to be able to grant a sub-licence, the following clause can be used: If the Licensee wishes to wholly or partly transfer his rights under this agreement to a third party as a Sub-licensee, this can only take place with the prior written consent of the Licensor. The Licensor s refusal to provide such consent must be objective and factually based on the financial circumstances or professional qualifications of the Sub-licensee in question or on other important grounds that entitle the Licensor to oppose the use of a sub-licence, including market-related competition. All income from such a transfer, including both one-off payments and licence income, is to be shared as follows: [insert %] to the Licensor and [insert %] to the Licensee. The transfer cannot take place on terms which place the Licensor in a worse position than the terms under this agreement, and the licence fee which falls to the Licensor for the sale of the Invention or products based on the Invention brought about by the sub-licensing cannot be lower than the licence fee which would fall to the Licensor if such a sale took place directly from the Licensee. The Licensee guarantees the Licensor that the Sublicensee will comply with the terms of the agreement in every respect, including the duty to pay the licence fee. No other transfer can take place by virtue of this agreement Other transfer The clauses of the agreement distinguish between transfer to a third party with no financial connection to the transferor, cf. section above, and those cases where there is a financial connection of such a nature that the Licensee and the third party can be considered to be so close to each other that it is a question of an affiliated company. In such situations it is sufficient for the Licensee to inform the Licensor of the transfer and of the identity of the receiving company.

13 12 The second part of the clause deals with the cases where there is a full transfer of the Licensee s assets and liabilities to a third party as part of a transfer of ownership of a company, e.g. during a merger, demerger or amalgamation. This can take place without the Licensor s consent provided that the parties payments under the agreement are not affected by this. 7.3 The Licensee s modifications and further development Cross licensing Modifications and customisations may be necessary e.g. in order to use the technology in local conditions or on the anticipated market. The agreement attempts to meet the opposing interests of the parties by means of a clause on cross licensing where the parties agree to place the new technology at each other s disposal without being obliged to pay for it The Licensee s improvements taken to be the Licensee s as a starting point It can happen that the Licensee improves or develops the Invention during production work without this being the goal. The parties can freely decide that the benefits based on developments, improvements and similar modifications made by the Licensee should also go to the Licensee. The starting point of the clause in the agreement is therefore that such additional income will not fall to the Licensor following the Licensee s further development of the Invention which cannot be attributed directly to the Licensor s Invention. Below you will find a suggestion for the wording which the parties can insert into the agreement in this situation: The parties are to keep each other informed without undue delay of developments, improvements and similar modifications which may be created on the basis of the Invention or in association with the Invention during the agreement period. If, during the agreement period, the Licensee makes developments, improvements and similar modifications to the Invention, the results in question belong to the Licensee. The Licensee is entitled to use these further developments etc. without the prior consent of the Licensor; the Licensee is also entitled to manufacture, market and sell these further developments etc. or products in which these are embodied although in return for payment of the licence for the underlying use of the Invention.

14 13 The Licensee cannot make use of the Invention after the agreement period, not even in combination with further developments The Licensor s right of first refusal to the Licensee s improvements Should the parties wish to change this starting point, it can be agreed that the Licensor will have a right of first refusal to the further development. It is believed to be quite rare for such a condition to be agreed, so it is recommended that advice be sought if the parties wish to include a clause on this Ban on modifications Another possibility is to ban the Licensee from carrying out research relating to the Invention for which the Licensee has acquired a licence. This can be justified by the fact that this would otherwise allow the Licensee to gain a technological insight which could be misused to the detriment of the Licensor even after the expiry of the licensing arrangements. The parties should be aware that such a ban in certain cases can be detrimental to competition and therefore could be set aside under the regulations on competition. If the parties do wish this solution, the text below can be inserted into the agreement, but out of consideration for the consequences in respect of competition law, it is recommended that advice be sought beforehand in the given case: The Invention can only be used in accordance with the clauses of the agreement and the Licensee does not have access to modify or redistribute the Invention or to carry out decompilation, reverse engineering or in some other way decode the Invention s subcomponents. 8. BREACH An agreement has been breached when one of the parties does not comply with the duty that the party in question has undertaken in respect of the other party by virtue of the agreement. The agreement should contain clear guidelines on breach of agreement, including when the agreement is deemed to have been breached. It is recommended that in light of this the parties consider which situations they believe should be characterised as a breach of the agreement. In this way the parties are able to make it clear that circumstances which perhaps in other contexts would not be characterised as a breach may in the given context have the desired effect.

15 14 Under the agreement s breach clause, it is made clear that a party may cancel the agreement in the event of the other party breaching the agreement. This is, however, contingent on the breach being a gross infringement of the agreement something which is classed as a material breach. An example of a material breach is if the Licensee does not pay the agreed licence fee or make adequate efforts to fulfil the duty of use. 9. COMPENSATION According to this clause, each of the parties is liable to pay compensation for their negligent or wilful actions (or omissions). This is the usual starting point in Danish law. The clause specifies some restrictions in the parties liability to pay compensation which are customary in compensation situations but, as it makes clear, such restrictions do not apply if a wrongful act or omission has been wilful or grossly negligent. The reasoning is that it must not be possible to restrict the consequences of this type of serious breach. The parties are able to supplement the compensation clause in the agreement with a clause on the payment of a fine. A fine is an amount set in advance which a party promises to pay as compensation for any potential breach it might commit, but which does not necessarily correspond to the loss (if there is any loss) which the breach causes. The advantage of imposing a fine is that the agreed compensation is triggered without the injured party having to prove exactly what the loss in kroner and øre is that the breach has caused. In certain situations it can be quite difficult to determine e.g. the Licensor s loss when the Licensee fails to comply with the duty to carry out targeted and effective marketing. At the same time though, the basic requirement for compensation in the agreement does assume a demonstrable loss. If the ability to demand a fine (and compensation to the extent the fine does not cover a loss) is required, the parties should in that case take a number of different factors into account. On the one hand, the objective is to encourage the parties to comply with their obligations. Whereas, on the other hand, the parties should avoid setting the level of the fine so high that there is a risk of it subsequently being set aside as unreasonably high by the courts in any legal proceedings. Below you will find a suggestion for the wording which the parties can insert into the agreement:

16 15 In the event of a material breach of the present agreement, the breaching party is obliged, in addition to the abovementioned compensation payment, to pay the other party a fine of DKK [x% of the total agreement amount or x% of the annual licence fee] although no less than [insert amount] for each individual breach. A material breach by a party is taken to mean that the party in question: Fails seriously in its obligations under this agreement, including: [insert description, e.g. if the Licensee does not pay the agreed licence fee or the Licensor does not offer the Licensee an agreed right of first refusal.] Commits a breach of the duty of confidentiality, cf. section AGREEMENT PERIOD AND NOTICE OF TERMINATION During the agreement period situations may arise which lead to changes to the agreement conditions which in turn result in a need to terminate the agreement even without there being any real breach. The parties should accordingly make sure, if they so wish, that the agreement expires at a specific time and that the clause allows for the possibility of setting out any notice periods. Irrevocability from the Licensor s side (for a certain period at least) has been introduced into the agreement. This is due to the fact that the Licensee often incurs considerable costs related to e.g. production, marketing, staff training, etc. associated with the Licensee s use of the Invention and that the Licensee has counted on writing off these costs, or part of them, over the agreement period. 11. FORCE MAJEURE This clause contains a rule on exemption of liability in those circumstances designated as force majeure where the parties failure to fulfil the agreement is caused by extraordinary reasons in the event of e.g. natural disasters, fire, riot, war or civil unrest etc. which the parties could not foresee when the agreement was entered into. The clause does not include an exhaustive list of the circumstances which can be considered force majeure situations. 12. INSURANCE Manufacturers and dealers are responsible for the products which they make and bring into circulation. In some countries, e.g. the USA, the parties may risk having to pay large sums in personal injury compensation as a result of defects in products in which the Invention is embodied. If the

17 16 Invention is inextricably linked to a specific product, the parties should therefore examine whether it is possible to take out product liability insurance which covers damage caused by the Invention. The agreement directs the Licensee to take out product liability insurance for a suitable insurance sum and, if possible, with the Licensor as a co-insured party. As of 1 December 2007, Danish patent holders are able to take out patent insurance which covers the costs of enforcing their patent rights in respect of third parties. This insurance is designed for small and medium-sized enterprises. The insurance typically covers the insured party s costs of enforcing their patent rights in respect of patent infringement by third parties, including the costs of legal action and assistance from lawyers and patent agents. If during a case of patent infringement the other party claims that the disputed patent is invalid, the insurance will generally also cover the costs of defending the patent s validity. If the Licensor and/or the Licensee wish to take out such an insurance policy, the agreement should also contain clauses on this. 13. CONFIDENTIALITY The confidentiality clause means that the parties undertake to keep secret the information the parties may acquire about the Invention in connection with the collaboration, most often also after the expiry or termination of the agreement. In this way the parties are protected in addition to the provision in section 19 of the Danish Marketing Practices Act on trade secrets. Conversely, the parties should specify the confidential know-how in such a way that a broad duty of confidentiality does not place unnecessary restrictions on the party s subsequent opportunity to run a business. Please also see the guidelines for the confidentiality agreement. 14. INFRINGEMENT OF THE INVENTION This clause takes into consideration the fact that during the agreement period there is a risk of one or more competitors wishing to manufacture products that infringe the rights transferred to the Licensee. The question is whether it is the Licensor or the Licensee which is responsible for pursuing the infringement by a third party and putting a stop to it.

18 17 The Licensee will generally expect the exclusive right not only to exist once the agreement is concluded but also to be upheld and enforced. It seems reasonable for the agreement to impose such an obligation to pursue infringements on the Licensor, especially if it is a question of granting several independent Licensees a non-exclusive licence to use the same Invention. 15. INFRINGEMENT OF OTHERS RIGHTS The agreement entrusts the Licensor with the responsibility for resolving the situation which arises if the Licensee s use of the Invention (possibly) infringes third party rights. In other words, it is the Licensor s problem if the Licensee s opportunity to use the Invention is restricted. 16. AUDIT Audit means hearing or examination. Under the clause in section 16, the Licensor is allowed to demand an audit to ensure that the Licensee is not fixing the calculation of the licence fee. This may be necessary if the Licensor e.g. is suspicious that underpayments are being made or if the Licensee provides misleading information in some other way. The parties should, however, be especially aware that the holding of an audit can be a time- and resource-consuming process which may also be an expensive business. The agreement thus allows for the audit clause to be omitted from the agreement. 17. LEGAL VENUE In the event of a disagreement between the parties in connection with this agreement, the parties should open negotiations with a view to resolving the dispute. Should this not settle the dispute, each of the parties is entitled to request the disagreement be settled by general court proceedings. Alternatively, the parties may agree that the disagreement is to be settled by arbitration. As a starting point, the agreement provides the parties with the opportunity to bring the case to the general courts (for this type of case it is usually the Danish Maritime and Commercial Court), since there are no grounds for allowing a simple dispute over, e.g. the size of an amount due, to be governed by arbitration proceedings. These will often be significantly more expensive than proceedings at the general courts because the parties have to pay arbitration fees and the parties

19 18 of an arbitration case do not have the opportunity to appeal the decision to a higher instance either. Conversely, the advantage of arbitration proceedings is that this method is a private process without the openness which is characteristic of legal proceedings at the general courts. The cases are often decided more quickly than normal legal cases, something which also entails a risk of an appeal process. If the parties wish the case to be settled by means of arbitration, this clause can be amended in accordance with the text below: Any dispute that may arise in connection with this agreement shall be decided finally by arbitration according to the Rules of procedure of the Danish Institute of Arbitration. The arbitral tribunal is appointed by the Danish Institute of Arbitration in accordance with the abovementioned rules. In their written complaint the claimant may propose someone as their arbitrator, while in their written answer the respondent may propose someone as their arbitrator. The third arbitrator, who is the chairman of the arbitral tribunal, is proposed by the Danish Institute of Arbitration unless the parties jointly propose a chairman before the expiry of the deadline for the respondent s answer. Copenhagen has been agreed as the venue for arbitration. It has also been agreed that the case shall be governed by Danish law and that the language of the case will be Danish for both written and verbal negotiations. 18. APPLICABLE LAW An agreement between two parties which are both resident and have their business in Denmark does not normally give rise to major problems in relation to which law is to be applied to the interpretation of the agreement. The situation is different when one of the parties to the agreement is foreign. In such cases it is a good idea for the agreement to refer to the rules of a specific country which will be used/apply in connection with the interpretation of the terms etc. of the agreement. Danish law is referenced in both model agreements. Should a party wish for law other than Danish law to apply, advice must be sought from experts from the desired country with a view to identifying the consequences of such an action, including the validity of the agreement etc.