A license agreement is a contract. More specifically, a license agreement often begins with an abbreviated background of the history of the dealings between the parties in the WHEREAS clauses. Next comes an exchange of promises based on the WHEREAS clauses. The agreements usually close with a prediction of potential future problems threatening the existence of the deal between the parties and agreed upon resolutions should one or more of these problems occur. Thus, a license agreement is a snapshot of a meeting of the minds of the parties at a particular point in time.
But life goes on and things change. For example, there is an unexpected dip in the economy, or product standards are changed, or a supplier discontinues the sale of a key component, or one of a host of other unexpected events occurs. In response to these changes, adjustments are made and the parties continue moving forward to with their deal; but, not quite as originally expected. But, just when things seem to get back to normal another unexpected event occurs. Once again, adjustments are made and the parties continue to move forward with their deal. Thus, the life of a business deal is like a movie. Scenes change. Characters come and go. Things happen. And, the relationships between the people and events cause changes to be made.
What of the snapshot that captured the agreement between the parties? Sadly, this snapshot is often forgotten as the movie which captures the life of a business deal plays on. Unfortunately, it is not until one of the parties becomes so unhappy about the deal that the snapshot is retrieved and negotiations begin regarding re-shuffling what was depicted in the snapshot to reflect current events. Unfortunately, such negotiations oftentimes bring an end to a relationship that could have been rewarding for both the parties if the relationship had been allowed to continue.
Too many business people miss the concept that license agreements, much like automobiles and software, need to be maintained. When the parties make adjustments to work through an unexpected problem, this is the time to re-read the license agreement to determine if small changes are required.
Many parties to license agreements are reluctant to suggest making any changes to bring a license agreement in step with a current situation for fear that it will open the door to re-negotiating other parts of the contract. While sometimes this may be a valid concern, the risk is that the evolving nature of the relationship between the parties will drift far enough away from the original agreement to effectively render the original agreement ineffective for resolving current problems.
In the worst case scenario, the various promises and obligations written into the original agreement no longer make any sense. Specifically, if the remedies defined in the original agreement are applied, a result would be obtained that makes little sense. Thus, instead of resolving a potential dispute between the parties, application of the terms in the original agreement would serve only to create additional problems.
Resolution of the foregoing problem may be easily accomplished by building into an agreement a mandatory periodic review of the relationship between the parties. Such periodic review may even include a predetermined list of discussion topics. Effective communication and early recognition of potential problems resolves disputes and avoids litigation. However, all too often, the parties to a license agreement let grievances and complaints fester to a level where emotions overtake the positive aspects of a business relationship. By scheduling periodic meetings and considering making adjustments to the foundational agreements as changes occur, the parties can continue to work together for their mutual benefit.
Just as a snapshot only reveals part of an ongoing relationship so too does a license agreement reveal only one part of an ever evolving business relationship. Thus license agreements shouldn’t simply be put on the shelf once signed – only to be looked at when a dispute arises. Rather, a license agreement should be understood for what it is – a snapshot simply recording the starting point of the movie which is the business relationship between two parties. As the business relationship between the parties goes through good times and bad times, the original snapshot needs to be adjusted. By making such adjustments, the parties to a licensing agreement can rely on each other to weather the unexpected ups and downs characteristic of today’s fast paced business environment.