Provision Database

Issue Introduction: License Grants

This issue refers to rights granted from one party to another to their intellectual property (IP) in connection with the development, manufacture or sale of a product. Licenses may be exclusive or non-exclusive,  granted under background, sideground and/or foreground IP, and they may come with restrictions on the geographic scope (“territory”), intended use (“field”), or whether rights can be passed through to a third party (“sublicense”). 

It is important that all parties to an agreement consider the extent and scope of the licenses granted in order to ensure that they are sufficient for the achievement of the project objectives whilst at the same time preserving rights to develop a product for other uses or markets. Some agreements, particularly those providing product development funding include license grants that a project funder can exercise if the developer is failing to meet the project objectives – these licenses are discussed in more detail under the Ensuring Continuity issue.

Questions to consider when developing a License Grants provision

  • Are any licenses granted for the use of background, sideground or foreground IP?
  • What is the scope of the licensed IP?
  • What is the territory of the license?
  • Is the license exclusive or non-exclusive?
  • Are there any restrictions on the use of the licensed IP?
  • Are there any specific obligations to exploit the licensed IP?
  • Can the licensee grant sublicenses to third parties?
  • Will products manufactured under license be marketed as branded or generic? (i.e. will they bear the licensor’s trademarks/trade dress)

Example approaches found in the MAPGuide

  • Are any licenses granted for the use of background or foreground IP?
    • The MAPGuide includes many examples of license grants to background and/or foreground IP. While this is usually the main purpose of license agreements, license grants can also be an important component of research & development, manufacturing, and technology transfer agreements.
    • Some agreements, particularly those involving a product development collaboration, include a reciprocal grant of rights between two parties, so that each party grants rights in certain background and foreground IP to the other party.
    • In other cases, one party may grant a license to background IP and the other party will grant a license to any improvements or new formulations of a product that it develops using that background IP.
  • What is the scope of the licensed IP?
    • The scope of licensed IP can be affected by the definitions of background and foreground IP. Some agreements include appendices with detailed lists of the licensed patents and other rights.
    • Some agreements in the MAPGuide focus on licensed patents, but others also include the transfer of the necessary technology and know-how to make the end product.
    • Agreements in the MAPGuide also take different approaches to whether the license grant includes only IP existing at the time the agreement is signed, or also extends to any relevant future developments. If the license does not automatically include future developments then in some cases the licensee will be granted an option to negotiate an additional license.
  • What is the territory of the license?
    • The territory of a license depends on the objectives of an agreement. Some license grants are worldwide, whilst other agreements specify either a single country or a list of countries. 
    • When the objective of an agreement is to enable a licensee to supply a product to underserved populations, then the territory may be limited to low- and middle-income countries as defined by World Bank classifications, or alternatively a list of GAVI-eligible countries.
    • Some licenses may have different exclusive and non-exclusive territories, or different territories for different products.
  • Is the license exclusive or non-exclusive?
    • Provisions in the MAPGuide vary in the use of exclusive or non-exclusive licenses. The approach taken is dependent on the context of the agreement, including the stage of development of the product, the objectives of the agreement and the parties to the agreement.
    • Some agreements may include a mixture of exclusive and non-exclusive rights for different components of IP, territories or fields of use. Exclusivity may also be limited to a certain period of time.
    • Some examples of exclusive licenses in the MAPGuide also include a reservation of rights by the licensor to use or grant rights to the IP in certain circumstances such as for educational and research purposes, or for non-profit use.
  • Are there any restrictions on the use of the licensed IP?
    • Most MAPGuide provisions including a license grant set out the activities for which the licensed IP may be used – for example, to develop, manufacture and sell a product. However the MAPGuide also includes some examples of specific restrictions on the related activities of the licensee. These include:
      • Not attempting to reverse engineer or design around any raw materials provided by the licensor.
      • Not using the IP for any purpose other than fulfilling the contractual obligations.
  • Are there any specific obligations to exploit the licensed IP?
    • Some agreements in the MAPGuide include a ‘diligence’ obligation, meaning that the licensee must use reasonable efforts to develop a product and bring it to market.
  • Can the licensee grant sublicenses to third parties?
    • Provisions in the MAPGuide vary as to whether they allow a licensee to grant sublicenses (i.e. an onward grant of the license to a third party) or not. The approach taken can be dependent on the context of the agreement.
    • When sublicense grants are permitted, agreements in the MAPGuide often include a set of conditions such as:
      • The licensor must provide prior consent.
      • There must be a written agreement with terms that are broadly consistent with the main (head) license agreement.
      • The licensor must receive a copy of the sublicense agreement.
      • The licensee is responsible for the performance of its sublicensees.
      • Sublicensees must have produced reasonable evidence demonstrating their intent and capability to fulfill the terms of the sublicense. This could include having sufficient production capacity and supply of raw materials.
    • Some MAPGuide agreements specify that sublicenses are permitted through multiple tiers, meaning that the licensee can grant a sublicense to an entity which then grants a further sublicense to another party.
  • Will products manufactured under license be marketed as branded or generic?
    • Not all agreements in the MAPGuide address the question of trademark use; those that do are generally related to products that the licensor has already brought to market in some countries (for example licenses granted by AstraZeneca to manufacture and sell its COVID-19 vaccine, or AbbVie’s licenses to MPP for HIV antiretrovirals). In these cases, the licensee generally has no right to use the licensor’s trademark and branding, and must develop its own trade dress.

Related MAPGuide Commentaries & Resources