Litigating royalties in a patent licence

Negotiating a good patent licence is a challenging business at the best of times: securing the terms you want commercially and then drafting the agreement to accurately reflect the deal agreed and govern it. However, in tough economic circumstances, when many businesses are under financial strain, making sure the terms of a licence are clear and effective is especially important. Nowhere is this more true than in royalty clauses: a poorly drafted royalty clause may lead to a costly dispute where one party tries to unravel a valuable obligation to the other.

This briefing looks at three salient examples where disputes have arisen from agreements that are unclear about what right the royalty is to be paid on, how much is owed and when it is to be paid.

The case of Oxonica Energy v Neuftec Ltd shows how a lack of precision when determining the scope of the rights being licensed can result in a dispute about the correct royalty to be paid…

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