Latest Q&A
From Suffolk IP Licensing
Q: When a licensor of IP elects to terminate an executory contract, and the licensee wants to continue using the ip and pay royalties, what happens to the rest of the terms of the contract? (example indemnify etc.)
A: Any contract terminated by the bankruptcy trustee could result in the estate being liable to the licensee for damages; however, the amount of damages would be limited because the damages would generally have the status of debts of an unsecured creditor. But more importantly, in the case of assertion of 365(n) rights, the licensee would give up rights for damages; the licensee essentially only retains license rights, not any collateral rights such as indemnification, warranty, etc.:
365(n)(2)C) the licensee shall be deemed to waive— (i) any right of setoff it may have with respect to such contract under this title or applicable nonbankruptcy law; and (ii) any claim allowable under section 503 (b) of this title arising from the performance of such contract.
Q: Is it better to sell or license IP? What are the benefits/disadvantages to both?
A: In general, the difference is based on the specific terms. Sales and licenses can in fact overlap. In some instances, sales (of patent rights) are more advantageous because of lower tax rates; however, in general a licensor retains more control than a seller over the use of the intellectual property, and thus is more able to control or retrieve it in case the transaction does not work out.
Q: Can you please re-explain the NPV example you were speaking about when we were discussing valuation [e.g. $5 payments]?
Also, can you please confirm whether the math on the royalty chart was accurate or not - I know that in class you had acknowledged that the "20" might be incorrect and that it might rather be "12." I'm having a difficult time breaking those numbers down/seeing how they are supposed to work, and wasn't sure if it was due to that.
A: The short answer is that NPV will not be relevant to or tested on the exam.
Q: What is the purpose of the valuation process for IP? I understand the concept that $5 today is worth more than $5 dollars in three years, and that it would be better to take the $5 today but I am unsure as to how that is really relevant to licensing? Is this just saying that its better to monitor your royalties so as the licensor, you are obtaining the most profitable amount necessary for your IP?
A: See above answer also, but more generally, the valuation process may be relevant to the setting of appropriate royalties and the structure of royalties. This may influence the terms as you have noted (agreements with the requirement to pay up front would have different terms than those requiring ongoing royalties).
