Intellectual Property Law

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A(inventor)+B(manufacturer) opened C to market the A's invention. C Operating Agreement(OA) say that A+B need to consent on all decisions. A granted an exclusive license to C and did not asked for minimum sales and royalties because he was 50% owner of C and need to consent for all C decisions. In the License agreement (LA) we can read about early termination: this agreement may be terminated by A if B or C breach this agreement(LA). In the LA there is nothing about if B breach the OA, or since the beginning (16 monts ago) B is taking C decisions without A consent. Sales are actually 1/30 of A and B forecasts. Does A can cancel the licence because of the B OA breach even if there is nothing about this on the LA early termination section? OA mentionned that for this kind of breach A can ask to be compensate for his losses. The amount of a potential losses will be very hard to establish in add B told A ''you never been in C decisions and will never be'' so I would prefer cancel the LA.

Submitted: 272 days and 21 hours ago.

Category: Intellectual Property Law

Value: $100

Status: AWAITING EXPERT REPLY

Cleveland, Ohio

Posted by Adam Kirk 272 days and 21 hours ago.

Answer

The license agreement is invalid because only A granted it. The operating agreement clearly calls for A and B to consent on all decisions, which would include the agreement to enter into a license agreement with C.

Further, A cannot hold B to the terms of the license agreement because B didn't consent to it.

272 days and 20 hours ago.

Reply

May be I was not enough clear, the LA stipulate that; early termination: this LA may be termited by A if B or C breach this LA it also says: this LA may be terminated by B if A breach this LA. So why could it be invalid? Even if LA early termination section tell nothing in case of OA breach by B can I cancel the LA because of this OA breach by B?
Operating Agreement (OA) and Licence Agreement(LA) are different documents but I would have never accepted to sign the LA (no minimum sales and royalties) without the OA (A+B need to consent on all decisions). Would you explain more your last sentence, I don't understand. This is very important for me to know if I can cancel the licence because another company asked me the exclusive licence and I would like to answer them ASAP.
Thank you!

Accepted Answer

C's operating agreement says that A and B must consent to ALL decisions. This would include a decision for C to enter into a license agreement with A. If A and B did not consent to A entering into a license agreement with C, then the license agreement is invalid due to lack of keeping the corporate form (abiding by the operating agreement).

My opinion is that the license agreement with C is invalid because A and B didn't approve it.

Accepts:
Expert:	Adam Kirk
Pos. Feedback:	100.0 %
Answered:	2/23/2009

Lawyer

Litigation Attorney

267 days and 8 hours ago.

Reply

Thank for your last week answer. Here a new question: As the licensor, A told B that C license is invalid and by the USPTO law C have to stop now to sell the product. As the 50% owner of C, A also told B that he want C to stop selling the product now. A told B that he will need to pay a penalty for each day that C will continue to sell the product. B refused and C continue to sell the product. The license contract stipulate the arbitration before the AAA what might take time, in the mean time dommages are very important for the licensor: no sales + possibility to lose a VERY IMPORTANT new license contract because a 1 billion sales company (D) is very interesting by the product. Does A can start to negotiate a new license with D now? Better wait for AAA arbitrator decision? D might be afraid to negotiate a new license before the AAA abitrator give his final decision. Is there a way to put C on hold now, in the mean time to have AAA arbitrator decision? A is very afraid to lose D interest in the product if start telling what is going on now between A B an C. Thank you!

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