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Last revision: 22/11/2023
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A Licence Agreement is a document used by the owner of some form of intellectual property - such as a logo, photograph, or song - to give permission to some other individual to use that property. The Agreement outlines how the Licensor (the Party who owns the property) will grant the license to use their property to the Licensee (the Party who is using the Licensor's property).
This type of Agreement is used in situations where the creator of intellectual property is okay with someone else using their property but wishes to ultimately retain their rights to the property and be compensated in exchange for giving the license. This is different from an Intellectual Property Assignment Agreement wherein the owner of the property gives away all of their rights to the work and does not receive continued compensation, known as royalty payments, in exchange for giving permission.
By using a Licensing Agreement, the owner of intellectual property is able to make money while also controlling how their property is used and disseminated out in the world. Further, individuals being granted a licence can use other people's intellectual property to grow their own business or make a living while protecting themselves from intellectual property infringement claims by defining the terms of the property's use.
This document allows the Parties to specify the length of use and how the property is utilised. For example, the Parties can specify the right to use a trademark or the right to sell or distribute intellectual property for a specific period of time.
Amendments to the Competition and Consumer Act 2010 (Cth) - 13 September 2019
Starting on 13 September 2019, some amendments to the Competition and Consumer Act 2010 (Cth) ("CCA") may impact many intellectual property arrangements in Australia. In particular, the CCA prohibits some conduct which is considered "anti competitive" or "cartel conduct".
If the parties have any concerns at all about whether or not they are going to be affected by these laws, they should strongly consider obtaining legal advice.
By way of general explanation, prior to 13 September 2019, section 51(3) of the CCA provided an exemption for some matters involving licensing or assignment of intellectual property. This meant, for example, that conduct involving licensing or assignment of intellectual property, which might otherwise be considered "anti competitive", might have been permitted.
However, starting on 13 September 2019, with the repeal of section 51(3), those matters involving licensing or assignment of intellectual property may no longer be permitted. The legislation places significant obligations on the parties, and its implications may be quite broad. There is also potential for this legislation to affect some conditions which may be common in many traditional intellectual property arrangements. The penalties for breach of these laws are also very high.
Therefore, if the parties have any concerns at all about whether or not they are going to be affected by these laws, they should strongly consider obtaining legal advice. This Agreement is only designed for use among parties which are not engaging in anti competitive or cartel conduct.
Further information about the changes is available on the website of the Australian Competition and Consumer Commission.
How to use this document
The Parties may describe the work being licensed in as much detail as possible, including information about the quality of the work that will be delivered from the Licensor to the Licensee for the Licensee's use. For example, the Agreement might provide that digital images being licensed be given to the Licensee in a particular format, size, or dpi. The Parties can then include information about whether the licence is exclusive (the Licensor will not grant licenses to other third-parties to use the property in the same way) or non-exclusive (the Licensor may give similar licences to other third-parties), the geographical area where the Licensee may use the property, and whether the Licensee is allowed to modify the property to create what is known as a derivative work.
Finally, and most importantly, the Parties can arrange how the Licensee will compensate the Licensor in exchange for permission to use the property by paying royalties. Royalty payments can be calculated in a number of ways including a one-time flat fee, a specific dollar amount paid for each unit of an item containing the licensed work sold by the Licensee, or a percentage of total net sales of any items made using the licensed work sold by the Licensee. The Parties can further specify when royalty payments will be made and what sort of documentation the Licensee will be required to give the Licensor when explaining how the royalty payment amounts were calculated.
Once the document has been prepared, several copies can be printed and signed. The parties can each keep a fully signed copy for their own records.
Importantly, if the Licensor is providing a warranty against defects, then the Australian Consumer Law imposes certain requirements on the Licensor. This includes requirements that warranty documentation be presented in a certain way, that specific information and wording be included in the warranty documentation, and that the mandatory wording be provided with the product itself (rather than the Licensee being referred to information on a website). Therefore, if the Licensor is considering providing a warranty against defects, seek legal advice.
There are various pieces of legislation in Australia which may affect intellectual property rights, such as the Copyright Act 1968 (Commonwealth), the Patents Act 1990 (Commonwealth); the Trade Marks Act 1995 (Commonwealth); and the Designs Act 2003 (Commonwealth).
In addition, the common law may apply to intellectual property matters. For example, Australian case law has considered many issues regarding copyright, such as what items are protected by copyright, and how long copyright protection might last.
A Licence Agreement is a contract and general principles of contract law, as provided by the common law, may also apply.
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