1 Hold-harmless clause with licensor getting licensee another

1)Hold-harmless clause with licensor — getting licensee another license — providing a non-infringing alternative or — defending an infringement suit (but not open-endedly) 2)Cost-sharing arrangement — if royalties have to be paid to third party — if infringement suit has to be defended 3)Renegotiation of royalty provision

A very important clause in non-exclusive licenses. Advisable 1. to stay away from vague phrases (such as, “other terms and conditions, ” 2. to include escape clauses or exceptions, e. g. settlements, 3. to give licensee the right to terminate and negotiate the license, if a subsequent licensee has been overly favored.

“Industry Standards” “Folklore — Suspect as Royalty-rate Guide” Chemicals 1 -5% Electronics 1 -5% Computers 3 -5% Consumer Products 2% Pharmaceuticals 4 -15% For exclusive licenses 20 -50% premium Up to 300% premium in pharma field

This case history clearly illustrates the dynamic interplay of step-up royalty/MFL clauses and a descending royalty scheme with the former inducing the smaller players to sign up when the bigger competitors—here Coherent and Spectra. Physics– are holdouts and thus have an additional competitive edge by not paying any royalties. And the descending royalty schedules entice the holdouts to take out licenses, inasmuch as their total royalty exposure is significantly reduced, e. g. down to about 1. 7% in the case of Spectra-Physics