The Grant Clause
copyright 1997 Donald M. Cameron , Aird & Berlis
Contents
The object of the Grant Clause is to grant permission to the Licensee to use certain intellectual property rights of the Licensor.
Care must be exercised by the Licensor that the Grant Clause does not grant "all right, title and interest in and to the intellectual property" to the Licensee. Such a clause would constitute an "assignment" of the intellectual property rights making the purported Licensee the new owner of these rights, to the exclusion of the purported Licensor.
Degrees of Exclusivity: Scope of Grant
The Licensor can grant to the Licensee a licence of varying scope.
The broadest scope of licence that can be granted is an "exclusive" licence. From its root in the word "exclude", an exclusive licence excludes the use of the intellectual property right licensed to everyone but the Licensee. After granting an exclusive licence, the Licensor is excluded from continuing to use the intellectual property. The grant of an exclusive licence is as close as one can come to assigning the intellectual property right. The Licensor retains ownership but licences away everything else.
A "sole" licence, once granted, prevents the Licensor from licensing the technology to anyone else. The Licensor retains the right to use the technology.
A "non-exclusive" licence can be granted as often by the Licensor to as many Licensees as desired. Most commercial software licensed today is licensed on a non-exclusive basis.
Right to "Use" the Software
A computer program is "used" when it executes to provide the desired result. The computer program is typically stored in permanent memory and copied to the Random Access Memory of the computer while individual steps of the program "execute". Arguably, this is a copying of the program from the hard drive to the RAM . Thus a licence to "use" a computer program implies that a licence has been granted to copy the computer program to the extent necessary to allow the computer program to execute.
This does not mean that the computer program can be copied so as to be modified by the licensee. Such a permission would have to be either expressly granted or be implied from other terms in the licence.
Unless specifically authorized, a licence to use the software does not allow a licensee to hire a third party service provider to modify the computer program.
One of the difficulties with limitations on use is the ability of the licensor to determine whether unauthorized use has occured. Other mechanisms must be used to monitor the use of the program by the licensee [i.e. the program itself providing an audit trail, inspection, non-competition clauses to prevent the licensee from marketing a competing product for a reasonable period of time so as to prevent use of any "secrets" in the licensee's new product].
When the licence ends, the Licensee will likely want to be able to export its data to a new program or environment. Licensees should ensure that their licence permits them to use the software to export their data. Without such licence, there may be no such right.
Use Restrictions
A licence grant can be limited to a certain kind or place of use of the software. Sometimes the limitations are expressed postively: the grant can be made specific to a certain computer in a certain location to process certain data. The more limitations that are included in the grant clause, the narrower the licence.
Some drafters include clauses to specify what the grant did not include. This can be drafting overkill, since whatever is outside the grant clause is not granted. However, Including a list of what the licensee cannot do serves the useful purpose of reminding the Licensee what cannot be done.
Whose Data May Be Processed?
The licence fee is sometimes based upon the amount of data processed by the Licensee.
Sometimes the licence permits the Licensee to process the data of its subsidiaries and/or affiliates. If the licensee is allowed to process the data of its related companies, affiliates or subsidiaries, those corporate terms should be defined as they may vary between legal jurisdictions.
Restrictions on Type of Equipment Using the Software
A particular computer may be able to process the information at a particular rate. If another processor is used, greater volume can be processed or the same volume processed faster resulting in a benefit to the licensee. The licensor may wish to be compensated for this added benefit by limiting the licence to a specific machine. Transfer of the software to a newer, faster machine would then attract an additional royalty.
Limitation to a Particular Version of the Software
If the description of the program is limited to a particular version, then the Licensee has no right to use or be provided with upgrades or revisions to the computer program. If desired, the agreement should define the licensed software as including the current version as well as revisions or upgrades supplied by the licensor from time to time.
Territorial Limitations
The licence can be restricted to a particular geographic or political region. If it is so limited, then use of the computer program in another jurisdiction is unlicensed use and is an infringement of the intellectual property rights in that particular area.
In this sense, intellectual property rights can be used as a non-tariff trade barrier preventing the grey-market importation of computer software from one country into another.
The licence could be limited to a particular market segment. For example, the Licensor could licence its distributor to sub-licence the computer program only to a particular market segment: for example the financial services industries but not to universities. This allows the Licensor to grant exclusivity to diffferent distributors in different market segments.
Prohibiting Reverse Engineering
"Reverse engineering" is the term used to describe taking something apart to learn how it works and to apply that knowledge to develop future products.
A clause could be included to prohibit a Licensee from reverse engineering.
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