Licensing Trade Secrets Overview and Sample Agreements
Trade secrets are valuable assets for businesses, as they can give them a competitive edge by protecting their unique products and processes. However, if these secrets are disclosed, the competitive advantage can be lost. Licensing trade secrets is a way for businesses to share these secrets with others while protecting their ownership rights. In this article, we’ll provide an overview of licensing trade secrets and offer sample agreements for businesses to use.
What Is Licensing Trade Secrets?
Licensing trade secrets is an agreement between two parties where one party (the licensor) lets the other party (the licensee) use their trade secrets in exchange for compensation. This allows the licensee to use the secrets to their advantage while providing the licensor with a new revenue stream.
Licensing trade secrets is different from licensing patents because trade secrets are not publicly disclosed. When a patentee licenses a patent, the details of the invention are publicly available. With trade secrets, only those who have signed a non-disclosure agreement (NDA) can access and use the information.
How to License Trade Secrets
When licensing trade secrets, clear agreements between the licensor and licensee are crucial. The agreement should outline the scope of the license, what information is confidential, and how the licensee can use the trade secrets. Here are some essential steps to take when licensing trade secrets:
1. Identify the trade secrets: Before licensing, make sure that the information you want to license is a trade secret. This may include formulas, designs, techniques, processes, and algorithms.
2. Determine the scope of the license: Decide how broad or narrow the license should be. Should it apply to a specific product or service, or should it be open-ended?
3. Draft a licensing agreement: Write up an agreement that specifies the terms of the license, payment amounts, and how the licensee can use the information. This agreement should also include provisions to protect the trade secrets.
4. Sign an NDA: Ensure that the licensee signs an NDA before gaining access to the trade secrets. The NDA should outline that the information is confidential and cannot be disclosed without permission.
Sample Licensing Agreement
Here is a sample licensing agreement that businesses can use as a starting point. This agreement covers the basics of the licensing arrangement and includes provisions to protect the trade secrets:
[INSERT COMPANY NAME] LICENSE AGREEMENT
1. Grant of License: [INSERT COMPANY NAME] (the “Licensor”) grants [INSERT LICENSEE NAME] (the “Licensee”) a non-exclusive, non-transferable license to use the trade secrets described in Exhibit A for the purpose of [INSERT PURPOSE].
2. Confidentiality: The Licensee shall maintain the confidentiality of the trade secrets and not disclose them to any third party without the prior written consent of the Licensor.
3. Term and Termination: This Agreement shall be in effect for [INSERT TERM] and shall automatically renew for additional periods unless either party gives written notice of termination. Licensor may terminate this Agreement immediately if the Licensee breaches any term or condition of this Agreement.
4. Consideration: The Licensee shall pay the Licensor an annual fee of [INSERT AMOUNT] for the term of this Agreement.
5. Indemnification: The Licensee shall indemnify and hold the Licensor harmless from and against any and all claims, damages, suits, liabilities, costs and expenses arising out of or in connection with the Licensee`s use of the trade secrets.
6. Governing Law: This Agreement shall be governed by and construed in accordance with the laws of [INSERT JURISDICTION].
7. Entire Agreement: This Agreement sets forth the entire understanding and agreement of the parties and supersedes all prior negotiations, understandings, and agreements between them.
Licensor: [INSERT SIGNATURE LINE FOR LICENSOR]
Licensee: [INSERT SIGNATURE LINE FOR LICENSEE]
Licensing trade secrets can be a profitable way for businesses to monetize their intellectual property while protecting their ownership rights. However, it’s crucial to have clear agreements in place to ensure that the trade secrets are safeguarded from disclosure. The sample licensing agreement provided in this article can be customized to meet the specific needs of any business.