License Agreement

License Agreement 

an agreement according to which one party (the licenser) gives the right to use an invention or other technical advance (license) to another party (the licensee), who pays an appropriate compensation. License agreements deal with technical concepts that are recognized as inventions according to the law of the country of citizenship of the license purchaser. They may also involve other technical advances, including production secrets (”know-how”).

The substantive features of a license agreement are the grant of the right to use the object of the agreement and the non-material nature of this object, which is defined in terms of specific characteristics (as a scientific and technical achievement). The scope of the rights given in the license agreement depends on the type of license. The conditions of the license agreement may establish the territory where the license applies (part of a country, one or several countries), the form in which the object of the license is used (including production and/or sale of articles, the employment of a certain technology), the quantitative scope of the license, and the term (usually from five to ten years). The license agreement also includes the conditions for transmitting technical documentation to the license purchaser and rendering him technical assistance by the exchange of specialists. These conditions also provide for the delivery of machinery and equipment prototypes, the mutual exchange of information between the parties on technical improvements made in the design, the participation of the parties in defending the rights of the license owner against infringement of these rights by third parties, and the procedure for resolving disputes involving the license agreement. The license agreement also determines the amount of license compensation, the manner of determining the amount, and the method of payment.

In the USSR, license agreements are used in trade relations with foreign organizations and are considered one of the forms of foreign trade transactions. Such agreements may be concluded only by the foreign trade organizations, that is, by the specialized all-Union association Litsenzintorg and other foreign trade associations.

Outside the Soviet Union, license agreements are also used by capitalist and some socialist countries in relations among organizations within the particular country.