UNCITRAL Considering Model Law of IP Licensing

The United Nations Commission on International Trade Law (UNCITRAL) is considering creating a model law concerning intellectual property licensing/transactions.  The Note by the Secretariat outlines the potential need and benefits from such a model law:

[T]he panel noted a gap in the law with respect to contractual matters. While some intellectual property laws contain a few provisions addressing contract terms, there is no general commercial law directed specifically to intellectual property licensing. Instead, contracting parties must rely on a general intellectual law merchant based on ad hoc rules and practices that often require specialized knowledge and experience. This causes increased transaction costs and barriers to international trade, and puts small and medium-size enterprises at a disadvantage.

. . . The panel referred to studies that show the benefits that States derive from increased intellectual property commerce. These benefits include: (a) superior access to finance and venture capital; (b) higher quality utilization of national human capital; (c) increased local inventive activity; (d) better access for local firms to technology: and (e) streamlined and enhanced access for the public to creative content. Realizing these benefits also requires legal support for commercial transactions in intellectual property, e.g. “licensing.” The lack of a general commercial law text specially crafted to the unique needs of intellectual property licensing constitute a barrier to realization of these benefits.

The Note by the Secretariat also lays out issues related to the feasibility of developing an international model law on intellectual property transactions similar to the CISG: 

"59. To establish the feasibility of the preparation of a uniform law text on intellectual property licensing, the panel then discussed a range of commercial issues that arise in typical intellectual property licensing contracts and ways in which they could be usefully addressed. These issues include the following: 

  (a) Scope of work: the proposed text should address intellectual property licensing issues that could be addressed with non-mandatory law rules that the parties could vary or derogate from, with the understanding that the text is not intended to alter provisions of intellectual property law;

  (b) Definitions and rules of interpretation: terms, such as “assignment”, “licence”, “exclusive”, “scope”, “use”, and other terms that would appear in the text, would need to be defined; also reference would need to be made to the general obligation of good faith and reasonable conduct;

(c) Contract formation: the question would need to be addressed whether there should be any special rules for the formation of an intellectual property licensing contract apart from a State’s general contract law rules on matters, such as written form and contract formation by electronic means; in this regard, it may be useful to review the Unidroit Principles of International Commercial Contracts;

  (d) Contract interpretation: a number of questions would need to be addressed, including whether: (i) the parties may agree to limit interpretation solely to the terms of a written instrument; (ii) if the written instrument is ambiguous, it is then proper to look to the conduct of the parties; (iii) a contract should be interpreted by neutral rules or whether there should be a rule in favour of one party (e.g. an author); and (iv) it is necessary to address interpretation of terms that call for successive performances, or that require performance to the satisfaction of the other party; 

  (e) Implied terms: the text would need to address the question whether an intellectual property licensing contract should be deemed to include implied terms, such as an implied representation about ownership or control of the intellectual property by the licensor, or a duty of cooperation, or mutual obligations to act in good faith;

  (f) Obligations and their performance: it may be necessary to address the general obligations of the parties (e.g. the licensor to enable use and the licensee to use according to the terms of the licence and pay royalties) and their performance; 

  (g) Transfer of rights and acceptance of duties: it may be necessary to address transfers of intellectual property rights by a licence agreement and transfers of contractual rights, for example, by an assignment of a right to payment, and to distinguish acceptance of duties from a transfer of rights; 

  (h) Breach of contract and remedies: it may be necessary to address situations that would constitute breach of an intellectual property licensing contract and the relevant remedies (e.g. whether exact or substantial performance is required, whether a distinction would need to be made between a breach that allows ending the contract and one that only allows damages, the measure and type of damages); and

  (i) Conflict-of-laws issues: the law applicable to an intellectual property licensing contract may also need to be discussed and in particular whether the parties may choose it and, if so, what matters may be covered by the law chosen by the parties. "