My licensee may be in financial difficulty. How can I protect my IP?
I think one of our licensees may have financial problems. Although I am reluctant to take drastic action that may sever our business relationship, how can I ensure that we protect our IP?
If you have a financially distressed licensee, the first
step is deciding whether to terminate the licence. A distressed
licensee can devalue your IP and limit your ability to grant
licences to other, potentially better performing parties. If
the licence is exclusive, all avenues to monetise the IP may be
blocked. Even if not exclusive, other existing or future
licensees may be deterred from paying because they would be
disadvantaged in competing with a licensee who is not
Additionally, it may be important to terminate if the
licensee's precarious position creates a risk that competitors
to whom you would never have licensed could get access to your
technology through voluntary M&A activity or bankruptcy.
This may be particularly important where trade secrets are
involved, although some courts will issue orders protecting
trade secrets to prospectively block such harmful releases of
If termination is necessary,...
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