Businesses licensing inbound technology or IP usually spend legal effort on ensuring that the licensor can’t assign the operative license agreement to a third party without the licensee’s consent. Often overlooked, however, is the risk of a licensor transferring the actual IP that is the subject of the license in question. The licensee’s hard-fought clause victories, like indemnities, might be for naught if the subject IP is sold. Datatreasury v. Wells Fargo (Fed. Cir. 2008) (“procedural” license terms–like an arbitration clause–do not “run” with the patent and so are not binding on subsequent owners).
One workaround is something like the following, featured in a Redline query about this topic:
Licensor shall ensure that (a) any transfer of ownership of intellectual property rights associated with the Licensed Technology will be subject to Licensee’s rights granted under this Agreement, and (b) any such transferee assumes the obligations of this Agreement. Any purported transfer not compliant with the foregoing will be void.
Problems abound with this approach, so another less obvious workaround, also taken from the same Redline query, is to modify the standard anti-assignment clause, as follows:
Neither party shall assign, subcontract, sublicense or otherwise transfer this Agreement,or any interest or subject matter of this Agreement, or assign or delegate any of its rights or obligations, without the prior written consent of the other party. Any such unconsented assignment or delegation will be void.
The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.
It’s good to be reminded of how fortunate we are to be practicing law in a society that upholds the rule of law, at least as a general matter nowadays.
On 29 January 2017, U Ko Ni was shot dead as he waited for a taxi outside Yangon International Airport in Myanmar. A prominent constitutional lawyer, acclaimed reformer and senior legal adviser to Daw Aung San Suu Kyi’s National League for Democracy (‘NLD’), he was working on creative legal strategies to circumvent the constitutionally-enshrined political power still held by the Myanmar military. The murder of such a skilled legal activist who was deeply immersed in using legal strategies to embed the rule of law speaks directly to the dangers of lawyering in ‘hybrid’ regimes, those countries in which elements of authoritarianism and democracy commingle. …. In Myanmar the daily realities of the formal criminal justice system remain largely as they have been for decades. Because the rule of law is functionally absent, lawyers cannot play the same role as in democratic regimes. After General Ne Win’s military coup in 1962, lawyers and the independent judiciary were subordinated as in other socialist-totalitarian regimes. The courts were co-opted as organs of State policy, although the former colonial legal procedures as well as much of the substantive laws were retained. However, private lawyering was not officially prohibited, and memories of the normative force of the law were kept alive even through the most repressive years of military rule. … Prior to the [Myanmar military] coup in 1962, law was an elite profession, but it has subsequently become degraded under military rule. The formal justice system operates very much as a market place, with bribes and facilitation payments changing hands depending on the size or type of case and the particular action required of the judge, prosecutor or police officer.
In this system lawyers are portrayed as skilled not in the law but in the relationships, market prices and pressure points necessary to secure a favourable outcome for the client. Lawyers do not have a privileged status in society, and law is thus not seen as a prestigious occupation. Myanmar lawyers also remain disadvantaged in education, independence and access to information. This diminishes their ability to identify and respond to governmental overreach.
In binding arbitration clauses, exceptions to the duty to arbitrate for injunctive relief claims are common, especially in confidentiality and technology license agreements. The intention is to ensure that the parties are free to pursue claims for emergency relief notwithstanding that all other claims must be resolved via arbitration.
All too many arbitration clauses, however, fail to articulate the injunctive relief bypass in a way that would allow the parties to actually bypass arbitration and proceed directly to court, given that rules of arbitration universally vest the arbitrator with the power to determine the scope of arbitrability.
The lesson of a recent US Supreme Court case, Henry Schein Inc. v. Archer White Sales, Inc. (US S. Ct. 2018), is that if the intention is to preserve the ability to go directly to court to pursue injunctive relief, without the need to first secure a non-arbitrability ruling from the arbitrator, the parties must make that intention clear.
Here’s recent work product from Redline illustrating how the typical clause could be modified to accomplish this objective:
Notwithstanding the [arbitration clause], either party may at any time bypass arbitration and pursue claims far injunctive relief in any court of competent jurisdiction. The arbitrator is not vested with authority to determine either party’s rights under this section, and either party’s right to pursue such relief is not arbitrable.
For more work product and collaboration on this issue, go here.
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The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.
In confidentiality agreements, clauses that time-bound the confidentiality obligation are not uncommon. “The obligations of confidentiality under this agreement expire five years after termination”, eg, is a typical formulation. Oft-cited justifications for this include administrative convenience, finality of obligations, and that most information is expected to “go stale” after a while.
The problem, however, is that a trade secret derives its protection from proof that the owner has exercised reasonable efforts to safeguard its secrecy. Routinely signing time-bound NDAs that allow the trade secrets recipient to freely use and disclose such trade secrets after the passage of time can be fatal to their protectability.
Protecting trade secrets from the operation of the time-bound is critical. Strategies for drafting and negotiating relevant work product in this regard can be found here at Redline.
Redline is a dynamic collaboration environment for a select cadre of lawyers worldwide.Watch the trailer Lawyers with Mojo or click here to learn more.
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The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.
A federal district court decision in Massachusetts (summarized ably here) is a grim reminder to all of us that even the most trivial article in the English language can make or break your client’s contract or case.
An employer sought to enforce a 2005 confidentiality and non-compete agreement against an employee who had contemporaneously signed a separate employment agreement. The employer required the employee to sign a new employment agreement in 2012.
The new employment agreement lacked any integration clause (ie, it lacked the usual “these are the only terms that apply between the parties” provision). Nevertheless, in ruling that the 2012 agreement superseded both the 2005 employment agreement and the 2005 confidentiality agreement, the court focused on the first paragraph of the 2012 document that introduces the rest of the agreement: “The following are the terms of employment: ….”.
Literally italicizing the term “the” in its analysis, the court held that the use of the definite article in the 2012 agreement conveyed an element of exclusivity, and consequently superseded both prior agreements.
Makes you wonder how any of us can ever sleep at night.
