IP As Property / IP Rights Licensing / International Licensing

4. International Licensing - Types of Agreements

All forms of intellectual property rights are in principle licensable, that is to say patents, designs, trademarks, and copyrights. I should perhaps make one brief comment here in connection with designs. In most parts of the world designs are not the subject of patent protection in the same way as they are in the United States but protection is affordable by means of registration of a design which gives protection for a limited period, typically 15 years from the date of filing of the registration but increasingly moving to a term of 25 years from that date. Interest in international protection of designs has increased significantly in recent years and is something which should be borne in mind when considering the portfolio available for licensing, particularly in view of the fact that it may be possible to secure design protection in some countries where the standard of inventivity or lack of functionality might not be sufficient to secure protection in the United States. Inclusion of design rights in a licensed package, or where possible a license under copyright (the maximum duration for protection of which is typically until at least fifty years after the death of the author), may permit an agreement to provide for payments for a longer term than might be possible under a patent license alone.

In addition to these traditional intellectual property rights, one may add licensing of know-how. The legal status of know-how throughout the world has always been problematical. Even in this country it was not until 1984 that the Supreme Court finally decided in the case Ruckelshaus v. Monsanto[1] that trade secrets should be regarded as a form of property. However, this view is not necessarily accepted throughout the world. Even in France, where the penal code makes it a crime for an employee to disclose a trade secret of his or her employer, the exact legal status of know-how as a property right remains rather unclear. Whether this situation will improve following the adoption of a new international code relating to Trade Related Intellectual Property Rights (TRIPS) as part of the Uruguay Round for modernizing the GATT remains to be seen. Article 69 of the TRIPS agreement requires countries to provide for protection for "undisclosed information" and in particular requires that natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information:

%bull; is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;

%bull; has commercial value because it is secret; and

%bull; has been subject to reasonable steps under the circumstances, by the personal lawfully in control of the information, to keep it secret.

It remains to be seen how this provision will be interpreted in different countries. It is, however, important to note that even with this definition in order to qualify as protectable information there must have been made reasonable steps under the circumstances by the person lawfully in control of the information to keep it secret. This clearly means that if one is intending to license something as a trade secret one must impose upon the licensee a set of conditions which are "reasonable under the circumstances" to ensure that the information being imparted is kept secret. This can sometimes prove difficult in negotiation of an agreement where a prospective licensee asserts that it must be free to disclose information for example to its customers or to government agencies. If a substantial portion of the value of the contract, however, relates to the supposed secret information then one has really no alternative but to insist that appropriate safeguards are included.

On the other hand the definition of what is protectable as a trade secret is fairly broad and is not confined to specific pieces of information which are themselves secret but encompasses anything which is not generally known or readily accessible to persons even if all of it was not known was a precise configuration or assembly of components. As compared to the definitions which have been used up to now in some countries, this is a fairly liberal definition and permits a reasonable amount of know-how to be incorporated within the definition. As long as one falls within this definition therefore, one can be reasonably assured that in WTO-member countries a contract clause granting licensing rights for such trade secrets will be upheld. A more practical problem arises as to whether if such trade secrets are in fact disclosed in breach of the contract one has any adequate recourse against the person who utilizes those secrets. As noted above this can be a significant practical problem in many countries. One should, therefore, consider in one's license agreement exactly what steps if any will be taken if one of the licensee's employees, for example, leaves and sets up in business by himself using stolen know-how.

Another difficult problem in this area is in respect of what is sometimes referred to as "show how" that is to say practical information as to how exactly to get something to work properly. It is tempting to lump this in with know-how in drafting an agreement. However, there are some countries where this would not be regarded as being a licensable right. In such situations it might be desirable to consider whether transfer of any such relevant information might be better dealt with in a consultancy or management services agreement as opposed to a strict intellectual property license agreement.

1. 467 US 986 (S. Ct. 1984)