This contract tip is about who grants intellectual property rights in a license provision.
Most license provisions say something like "Seller grants... " or "Seller licenses... "
My advice is to pause if you see another entity granting a license when that entity is not a party to the agreement.
These other versions may read:
- "Seller and its Affiliates grant... " or
- "Seller, on behalf of itself and its Affiliates, grants... "
It is critical to clarify this point.
I start by asking the seller to confirm of those affiliates are granting direct licenses to the buyer or is it a sublicense.
If the affiliates granted the seller sublicense rights, then there is no need to add additional language about the affiliates. The seller itself grants the sublicenses.
If the seller's affiliates are granting the rights directly to the buyer, then I check to see if those affiliates are listed as parties and signing the contract or that the affiliate has provided an end user license agreement (EULA) to create contractual privity with the licensee.
If there's no signature or EULA, the only way for them to grant rights in this contract is by appointing the Seller as their agent to grant the rights on their behalf. In those cases, I ask the seller to add a representation and warranty that the Seller acts as the affiliates' agent and has the authority to grant the license on behalf of the affiliates.
If the seller is not willing to add that representation and warranty, I insist on removing the references to the affiliates granting rights.
It just creates confusion about the identity of the licensor, confusion that could create problems later.
What's your approach to seller's affiliates being named as licensors?
#contracts