Different kinds of licenses

A patent license agreement will often include a provision forbidding a licensor from exploiting the invention himself and/or granting similar licenses to third parties. A license is called a "non-exclusive license", when no such restrictions have been imposed on the licensor. If the licensor may not grant similar licenses to any third parties, but the licensor is not prevented from exploiting the invention himself, the license is called a "sole license". If the licensor must refrain from granting licenses to third parties as well as exploiting the invention himself, the license is called an exclusive license. A license and the exclusivity granted to a licensee may be world-wide or may be limited to certain countries, or even to particular regions within a country.

"Sole license" and "exclusive license" are commonly regarded as being very precise terms with specific meanings. Unfortunately, they are not. If a Danish licensor, for example, has granted an Italian licensee the "exclusive license" to produce and sell a certain product in Italy, it is not necessarily clear whether the licensor may or may not sell the product in Denmark to an Italian company which clearly wishes to take the product to Italy and put it on the market there. When major players in a market are involved in patent licensing transactions in the European Union, exclusivity clauses are subject to a quite complicated set of competition law rules. Non-compliance with these rules may be met by rather drastic sanctions. There are thus several reasons for exercising care when drafting exclusivity clauses in a patent license agreement.