Royalty clauses

1. Royalty clauses

3. Brulotte v. Thys License of 12 (7 used); along with machine purchase License continues after last expires; royalties were the same The present licenses draw no line between the term of the patent and the post-expiration period. The same provisions as respects both use and royalties are applicable to each. The contracts are, therefore, on their face a bald attempt to exact the same terms and conditions for the period after the patents have expired as they do for the monopoly period. We are, therefore, unable to conjecture what the bargaining position of the parties might have been and what resultant arrangement might have emerged had the provision for post-expiration royalties been divorced from the patent and nowise subject to its leverage.

4. Effect on practice Adjust royalty provisions in multi-patent licensing. Lump sum payment deferred vs. royalty not affected Non-patent licensing � Aaronson case Convenience vs. coercion

5. Reacting to change Long term nature of license is a factor Market shifts etc. Ability to go up and ability to adjust down Modification as an issue Consideration? Good faith result?

6. Arbitron case Single station license Company merges In the event that Arbitron consents to the assignment of this Agreement, Arbitron reserves the right to redetermine the rate to be charged to the assigned.... Station agrees that ... if it is or was purchased or controlled by an entity owning or otherwise controlling other radio stations in this Market or an adjacent Market, ... Station ... will report the change � In the event of such occurrence, station further agrees that Arbitron may redetermine its Gross Annual Rate for the Data, Reports and Services licensed hereunder� Invalid because no standards Other analyses: Good faith / commercial reasonableness

7. Responses to escalation Automatically to �X� Automatically based on �Y formula� Withhold consent until agree to modify Limit to one station use?

8. WH v. SMC, p.550 License with MFL clause �[i]f Willemijn, after execution of this agreement � grants a license under the Patent containing provisions that require payments at rates of royalty less than provided for in [the royalty provisions of the agreement], Willemijn shall promptly notify [SMC] of those royalty provisions. [SMC] shall then be entitled � to substitute for [its royalty] provisions . . . the corresponding provisions of such other license but only if [SMC] also agrees to accept any other terms and conditions of such other license identified by Willemijn to [SMC].� WH settles with Proteon; no royalty Arbitrator holds clause not triggered No payments Can�t perform all conditions Not better.

9. SGK v. Hercules, p554 Grants lciense to H; settles with Amoco paid up license First license states: If a license shall hereafter be granted by [SGK] to any other licensee � to practice the Process or to use and sell the products of �, then [SGK] shall notify Hercules promptly of the terms of such other license and if so requested , shall make available to Hercules a copy of such other license and Hercules shall be entitled, upon demand � to the benefit of any lower royalty rate or rates for its operations, as of and after the date such more favorable rate or rates became effective under such other license but only for so long as and to the same extent and subject to the same conditions that such . . . lower royalty rate or rates shall be available to such other licensee. Argues � no duty to notify Paying licensee

10. Problem 11.7 Draft a �most favored licensee� clause for franchise agreements entered into by Big Burger with its several thousand franchisees. The licenses deal primarily with trademark rights and use of special procedures to make burgers. There are over 1,000 franchises and several hundred added per year. Big Burger is frequently involved in litigation about its trademark and with some of its franchisees. Issues: When triggered? New licenses, modification of old? Lump sum covered? Relevant to litigation claims etc. Notification issue