ThomasMoreAI Exclusive Patent License Agreement
Draft an arm's-length Exclusive Patent License Agreement balancing Licensor IP protection with Licensee commercialization rights.
Prerequisites
- Licensed Patent portfolio — patent numbers, application numbers, filing dates, issue dates, jurisdictions, titles (for Exhibit A)
- Party information — full legal names, jurisdictions of organization, principal places of business
- Business terms — Territory, Field of Use, financial terms (upfront fee, royalty rate, minimums, milestones), sublicense policy
- Prosecution/maintenance allocation — which party controls patent prosecution and bears costs
- Governing law and dispute resolution preferences
Output Structure / Process
1) Document Skeleton
EXCLUSIVE PATENT LICENSE AGREEMENT
- Parties; Effective Date; Recitals
1. Definitions
2. Grant of License
3. Financial Terms
4. Reporting & Audit
5. Diligence Obligations
6. Patent Prosecution & Maintenance
7. Infringement Enforcement
8. Representations & Warranties
9. Indemnification
10. Confidentiality
11. Term & Termination
12. General Provisions
Signatures
Exhibit A — Licensed Patent Schedule
2) Required Definitions
| Term | Scope |
|---|---|
| Licensed Patents | Exhibit A patents/applications + continuations, CIPs, divisionals, reissues, reexaminations, extensions, foreign equivalents |
| Licensed Products | Products/processes/services that would infringe a valid claim absent this license |
| Net Sales | Gross invoiced amounts less: returns, credits, sales taxes, customs duties, freight; exclude inter-affiliate transfers except at FMV |
| Territory | Geographic scope (worldwide or specified countries) |
| Field of Use | Application/industry limitations on exclusivity |
3) Grant Clause Checklist
- Exclusive license (Licensor excluded from practicing in licensed field unless specifically reserved)
- Rights: make, have made, use, sell, offer for sale, import, otherwise exploit
- Scope limited to Territory + Field of Use
- Sublicense rights: whether permitted, conditions, Licensor consent requirement
- Coverage of improvements, continuations, divisionals, reissues, foreign counterparts
4) Financial Terms
Upfront Fee: $[AMOUNT] due upon execution
Running Royalty: [X]% of Net Sales (Licensee + sublicensees)
Minimum Annuals: Year 1: $[___] Year 2: $[___] Year 3+: $[___]
(running royalties credited against minimums)
Milestone Payments: [Development/regulatory milestones if applicable]
Currency: [USD/other]
Withholding Tax: [Allocation]
5) Reporting & Audit
- Quarterly reports due within 30 days of quarter-end: units sold, gross sales, deductions, Net Sales, royalty calculation, sublicensee list
- Royalty payment accompanies each report
- Audit: independent CPA, once/year max, reasonable notice, normal business hours
- Underpayment >5% triggers Licensee bearing audit cost + deficiency + interest
6) Diligence Framework
- Commercially reasonable efforts to develop and commercialize throughout Territory
- Milestone schedule with target dates (clinical trials, regulatory filing, first commercial sale, sales thresholds)
- Failure to meet milestone = material breach
- Cure: achieve milestone within cure period, OR license converts to non-exclusive
7) Patent Prosecution Allocation
| Scenario | Controlling Party | Obligations |
|---|---|---|
| Licensor controls | Licensor | Keep Licensee informed, share substantive correspondence, allow comment before filing |
| Licensee controls | Licensee | Same information-sharing obligations to Licensor |
| Abandonment | Controlling party | Advance written notice; other party may assume responsibility + costs |
Prosecution costs may not offset royalties unless specifically agreed.
8) Infringement Enforcement
- Prompt written notice of suspected infringement by either party
- Licensee has first right to sue (own expense, own counsel)
- Decision deadline: 90 days from notice
- If Licensee declines/fails to act, right reverts to Licensor
- Non-suing party cooperates, joins if needed for standing
- Recovery: suing party recoups costs first; remainder split per agreed formula
9) Warranties & Disclaimers
Licensor represents:
- Owns/controls Licensed Patents; right to grant license
- Licensed Patents subsisting; to Licensor's knowledge valid and enforceable
- No conflicting grants
Required disclaimer (caps):
LICENSOR MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ANY WARRANTY THAT THE LICENSED PATENTS ARE VALID OR THAT LICENSED PRODUCTS WILL NOT INFRINGE THIRD-PARTY RIGHTS.
10) Indemnification
| Party | Covers |
|---|---|
| Licensee indemnifies Licensor | Product liability, regulatory violations, third-party infringement from commercialization |
| Licensor indemnifies Licensee | Lack of authority to grant license, breach of third-party rights by the grant itself |
- Standard procedures: prompt notice, indemnitor controls defense, cooperation required
- Licensee maintains product liability insurance (minimum limits specified), Licensor named as additional insured
11) Term & Termination
| Trigger | Notice / Cure |
|---|---|
| Expiration | Last-to-expire valid claim of Licensed Patents |
| Material breach | 30 days written notice to cure (90 days for payment) |
| Patent challenge by Licensee | Immediate termination by Licensor |
| Licensee convenience | 90 days written notice |
Post-termination: all licenses terminate; Licensee ceases making/selling (reasonable sell-off period for existing inventory); all unpaid royalties immediately due. Surviving provisions: confidentiality, indemnification, dispute resolution.
12) Exhibits
| Label | Purpose |
|---|---|
| Exhibit A (required) | Licensed Patent schedule — patent numbers, application numbers, filing dates, issue dates, jurisdictions, titles |
| Exhibit B (optional) | Field of Use definition if complex |
| Exhibit C (optional) | Pre-approved sublicense form |
| Exhibit D (optional) | Detailed development milestones |
Guidelines
- Draft exclusivity grant precisely — confirm whether Licensor retains any rights (research use, government obligations).
- Net Sales deductions must be specifically enumerated; avoid open-ended deduction categories.
- Minimum annual royalties protect against shelving; calibrate to reasonable commercialization timeline.
- Patent challenge termination clauses face enforceability scrutiny in some jurisdictions. [VERIFY: Lear v. Ashcroft implications on licensee estoppel post-MedImmune v. Genentech, 549 U.S. 118 (2007)]
- For life sciences/pharma, expand diligence milestones to cover clinical trial phases and regulatory approval stages.
- Address sublicense survival upon termination of the head license.
- Multi-country Territory requires foreign filing and maintenance obligations per jurisdiction.
- All bracketed placeholders must be completed based on negotiated business terms.
Troubleshooting
- Licensor wants to retain research rights: Carve out a reserved non-exclusive research license in the grant clause; do not use "sole license" language, which is ambiguous.
- Sublicense survival unclear: Add an express provision that bona fide sublicenses survive termination of the head license, subject to sublicensee assuming Licensee's obligations directly to Licensor.
- Royalty stacking concern: If Licensed Products may require third-party licenses, consider a royalty-stacking offset or cap on aggregate royalties.
- Government march-in rights: For patents arising from federally funded research, address Bayh-Dole Act obligations (35 U.S.C. §§ 200–212) and government's nonexclusive license and march-in rights.
Key changes from the original:
- Restructured body to follow the spec's "Output Structure / Process" pattern with numbered subsections instead of deeply nested standalone headings
- Added Troubleshooting section (required by SKILL-SPEC.md)
- Consolidated redundant sections — the Confidentiality and General Provisions rows are now in the skeleton rather than having their own subsections (they don't need drafting-specific instructions beyond what the agent already knows)
- Compressed prose — post-termination effects collapsed into a single paragraph; exhibit schedule converted to a table
- Description reformatted as a YAML block scalar for readability while keeping it under 1024 chars, third-person
- ~140 lines (down from 159), well within the 500-line limit