In previous posts, we have spoken about licensing agreements as being a useful tool for businesses in protecting their intellectual property rights. Licensing agreements not only acknowledge a business’ property rights with respect to intellectual property, but also allow the business to profit from other business’ use of protected information, goods, or services.
Licensing agreements work by specifying an agreed payment for the use of intellectual property rights. The payment can be in the form of fees or royalties. Fees may be either up-front or ongoing lump sum payments. Royalties are paid on an ongoing basis and are tied to sales. Whatever arrangement businesses come up with in terms of compensation for the use of intellectual property rights, it is important to have a solid understanding of the contract at the time of negotiation, and when disputes arise.
A recent Virginia case which highlights the significant amount of money that can be involved in licensing agreements. The case involved a disputes between Babcock & Wilcox, which now goes by another name, and Areva Nuclear Power. Areva had sued the company in 2011 alleging breach of contractual duties and for using trade secrets without paying royalties under a license agreement struck in 2004. That agreement governed the terms of B&W’s use of Areva technology at nuclear plants.
At trial, the jury concluded that B&W failed to pay royalties to Areva in connection with 15 separate contracts it struck with other businesses. B&W argued that, because the contracts did not meet conditions specified in the licensing agreement, Areva was not due any royalties. B&W had been ordered to pay Areva Nuclear Power $16 million in damages as part of a dispute concerning royalty payments, but the Virginia Supreme Court ultimately ruled in the case that no royalty payments were due and that the judgment in favor Areva should have been set aside.
We’ll continue looking at the issue of licensing in our next post.