From software to jingles – an ABC of license agreements

Crafting an effective IP licensing agreement involves safeguarding interests and fostering mutually beneficial partnerships. Whether you are an author or acquirer of copyright-protected work, here are four key aspects to bear in mind when drafting these agreements.

This article was written by Helery Maidlas, an associate with the Competition and Regulatory team of the law firm Sorainen.  

In the dynamic landscape of modern business, intellectual property (IP) holds immense value. 
Whether it’s a tailor-made jingle for an advert for your product or a software code that constitutes a cornerstone of your business, leveraging this valuable resource often involves the strategic use of licensing agreements. At the heart of it all are copyrights. Copyrights protect the authors of literary, artistic and scientific works from the unlawful use of their work. Crafting an effective IP licensing agreement involves safeguarding interests and fostering mutually beneficial partnerships. Whether you are an author or acquirer of copyright-protected work, here are four key aspects to bear in mind when drafting these agreements.

1. Extent – assignment and licensing
There are two types of copyrights: economic and moral rights. Economic rights allow right holders to derive financial reward from the use of their works by others. Under Estonian law, this includes, for example, reproduction right to the work and distribution rights. By contrast, moral rights focus on enabling authors to protect the integrity of their work and assert their paternity over it, for example, right of authorship and right of additions to the work. The difference is important in light of IP license agreements because while economic rights can be both licensed and assigned, moral rights can only be licensed. This means that in a situation where both parties to the agreement wish to agree that the author “gives away all of their rights to the work”, the parties should reconsider because although this sounds comprehensive, it can only regulate economic rights. 

2. Exclusivity
Depending on the nature and purpose of the work that is the subject of the license agreement, parties should decide whether the license given is exclusive or not. In other words, whether the acquirer of the copyright-protected work is the only person who has the right to use this work or not.

3. Territoriality and medium
The range of rights is changing and expanding all the time, and this is especially the case due to the growth of new digital media. Can this tailor-made advert be shown only once on TV, or can it be shown for two years on a billboard in Times Square? It is all a matter of agreement between the parties, but the important thing is that the parties have a mutual understanding of the medium and reach of the license. Further, it should be kept in mind that copyrights are territorial, so it should be specified in the license agreement whether the license is valid all around the world or only in one or two relevant countries. 

4. Term – specified or unspecified
The term of the license agreement can be specified or otherwise – i.e. a certain period can be mentioned or not – but unfortunately, parties quite often forget to think about this issue at all. However, this may become especially important when one party wants to terminate the agreement. It might sound appealing to grant the license indefinitely if the aim is to give as extensive a licence as possible but remember that under Estonian law, even if granted indefinitely, proper notice can still put an end to the agreement. Therefore, it is sometimes wiser to just agree on a very long term rather than an unspecified term. 

To sum up, a well-crafted IP licensing agreement serves as a strategic instrument to leverage IP effectively, enabling businesses to capitalize on innovation while mitigating risks. By addressing key considerations and drafting comprehensive agreements, businesses and individuals can navigate the complexities of IP licensing while fostering a culture of innovation and growth.

Come meet the law firm Sorainen at sTARTUp Day 2024! Their team members will host a panel discussion on ESG and startups, as well as seminars on picking the right funding model and strategic IP management on January 25. Startups can also benefit from personalized legal guidance in Sorainen Legal Clinic on January 24.
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