A trade secret license agreement is a legal document that outlines the terms and conditions under which a licensor grants a licensee the right to use, access, or disclose a trade secret. This agreement is crucial for protecting the confidentiality of valuable proprietary information while enabling its controlled dissemination for specific purposes.
Key Components of a Trade Secret License Agreement:
Professional License Agreement Templates ᐅ TemplateLab
1. Parties
Licensor: The owner of the trade secret.
Licensee: The entity granted the right to use the trade secret.
2. Definitions
Clearly define key terms such as “trade secret,” “confidential information,” “license,” “royalties,” “perpetual license,” “limited license,” “exclusive license,” “non-exclusive license,” “termination,” and “breach.”
3. Grant of License
Scope: Specify the nature and extent of the license granted (e.g., exclusive, non-exclusive, limited to specific purposes).
Duration: Determine the duration of the license (e.g., perpetual, fixed term).
Territory: Define the geographic area in which the license is effective.
4. Trade Secret Description
Detailed Description: Provide a comprehensive and accurate description of the trade secret, including its unique characteristics and distinguishing features.
Proprietary Nature: Clearly state that the trade secret is proprietary and confidential.
5. Confidentiality Obligations
Duty of Confidentiality: Impose a strict obligation on the licensee to maintain the confidentiality of the trade secret and any related information.
Disclosure Restrictions: Prohibit the licensee from disclosing the trade secret to third parties without the licensor’s written consent.
Security Measures: Require the licensee to implement reasonable security measures to protect the trade secret.
6. Royalty Payments
Payment Terms: Specify the amount, frequency, and method of royalty payments.
Royalty Rates: Determine the basis for calculating royalties (e.g., net sales, units sold).
Payment Due Dates: Establish deadlines for royalty payments.
Indemnity Obligations: Allocate responsibility for indemnifying the other party against claims or losses arising from the trade secret or the agreement.
8. Termination
Grounds for Termination: Outline the circumstances under which either party can terminate the agreement (e.g., breach, insolvency).
Consequences of Termination: Specify the consequences of termination, such as the return of trade secret materials and the cessation of royalty payments.
9. Governing Law and Dispute Resolution
Choice of Law: Select the governing law that will apply to the agreement.
Dispute Resolution: Specify the mechanism for resolving disputes (e.g., arbitration, mediation, litigation).
10. Entire Agreement
Merger Clause: State that the agreement constitutes the entire understanding between the parties and supersedes all prior or contemporaneous communications.
Additional Considerations:
Assignment: Address the assignability of the license.
Intellectual Property Rights: Clarify ownership of any intellectual property created using the trade secret.
Audit Rights: Grant the licensor the right to audit the licensee’s records to verify compliance with the agreement.
Survival Clauses: Ensure that certain provisions of the agreement (e.g., confidentiality obligations, indemnity) survive termination.
Force Majeure: Address events beyond the parties’ control that may excuse performance of the agreement.
Designing a Professional Trade Secret License Agreement:
Clear and Concise Language: Use plain, straightforward language that is easy to understand.
Consistent Formatting: Maintain consistent formatting throughout the document to enhance readability.
Professional Appearance: Use a professional font and layout that conveys credibility and trustworthiness.
Legal Review: Consult with an attorney to ensure that the agreement complies with applicable laws and protects your interests.
By carefully crafting a well-drafted trade secret license agreement, you can establish a solid legal foundation for protecting your valuable proprietary information and facilitating its controlled dissemination.
