Document type: Checklist Practice area: Intellectual Property — Patents Jurisdiction: United States Last reviewed: 5 September 2026

Section 1 — Identify the negotiation

  • Technology transfer, cross-licence, or assertion settlement? The provisions that matter differ
  • Is there a relationship after signature, or does the deal end the relationship?
  • Will this agreement be produced as a comparable in later negotiations or litigation?
  • Who has leverage, and from what — patents, litigation cost, design-around cost, or time?

Section 2 — What is being licensed

  • Schedule of patents by number, with jurisdiction, filing, priority, and expiration dates
  • Pending applications, and whether the grant extends to patents issuing from them
  • Assignment records pulled and chain of title verified
  • Co-owners identified — each may license independently; exclusivity requires all
  • Prior licences, options, and rights of first refusal disclosed
  • Security interests and liens searched
  • Bayh-Dole: federal funding, election of title, confirmatory licence, U.S. manufacturing preference, march-in rights
  • Standards commitments and FRAND obligations
  • Consent decrees or settlement obligations affecting the patents
  • Litigation and post-grant proceedings, past and pending
  • File history reviewed for the claims that matter
  • Terminal disclaimers and patent term adjustment reflected in expiration dates

Section 3 — What the licensee needs

  • Products that will practise the patents, current and roadmap
  • Manufacture: in-house or contract? Contract manufacture requires have-made rights
  • Component sales — do customers need rights?
  • Distributors and resellers — covered by the authorized sale, or separately?
  • Territories of manufacture and of sale, which may differ
  • Fields, and whether a field limit is acceptable at a lower rate
  • Sublicensing needs: affiliates, joint ventures, customers
  • Right to modify and improve

Section 4 — Freedom to operate

  • Claim charts mapping each asserted claim element to the accused product
  • Non-infringement positions identified and documented
  • Invalidity analysis: prior art, section 101, section 112
  • Other patents reading on the product — does this licence actually clear the path?
  • Design-around cost, delay, and performance impact quantified — the real benchmark
  • Litigation cost estimate, both sides

Section 5 — The grant

  • Rights enumerated: make, have made, use, offer for sale, sell, import
  • Exclusive, sole, or non-exclusive — and the diligence obligations that come with exclusivity
  • Field stated as a limitation on the grant, not as a covenant — the difference between preventing exhaustion and not
  • Field defined by an objective referent: end product, specification, regulatory class, customer type
  • Field expansion mechanism: option, right of first negotiation, or stated rate
  • Territory
  • Have-made rights, limited to products made to the licensee's specifications, for its account
  • Contract manufacturers bound in writing; reporting obligation
  • Express statement that have-made is not sublicence
  • Sublicensing: permitted? consent? standard for withholding? flow-through royalties?
  • Sublicence survival on termination of the head licence — converts to a direct licence
  • Affiliates: defined; in or out; what happens when an entity ceases to be one
  • Assignment and change of control — patent licences are presumptively non-assignable

Section 6 — The money

  • Base: per-unit, percentage of net sales, smallest saleable unit, or total sales with a lower rate
  • Apportionment where the patent covers a component
  • Net sales deductions enumerated exhaustively; overhead, marketing, COGS, bad debt, and affiliate charges excluded
  • Rate benchmarked against margin, contribution, remaining term, and position strength
  • Structure: lump sum, running, or hybrid with a creditable up-front
  • Minimums, with conversion to non-exclusive rather than termination as the consequence
  • Milestones defined so that occurrence is objectively determinable
  • Step-downs on patent expiration — Brulotte compliance
  • Post-expiration payments allocated to non-patent consideration if any
  • Stacking relief, with a floor
  • Most favoured licensee: limited to comparable grants, excluding settlements, take-the-whole-licence, notice and election
  • Currency conversion source, date, and cost
  • Withholding tax and gross-up
  • Late payment interest

Section 7 — Reporting and audit

  • Quarterly reports, due 45 days after period end
  • Contents: units by product and territory, gross, each deduction itemized, net, rate, amount due
  • Annual audit right, 30 days' notice, accountant of the licensor's choosing
  • Access to underlying records; retention period matching the objection period
  • Cost shifting at a stated variance — the provision that makes audits happen
  • Licensee protections: one audit per year, look-back limit, accountant reports only the discrepancy
  • Sublicensee statements and audit rights

Section 8 — Improvements

  • Improvement defined narrowly — cannot be practised without infringing the licensed patents
  • Each party owns what it invents
  • Grant-back non-exclusive — exclusive grant-backs raise misuse concerns
  • Licensor's future improvements: included if dominated by the licensed patents; option on others
  • Independently developed work expressly excluded

Section 9 — Enforcement and standing

  • Non-exclusive licensees have no standing, ever
  • Does the licensee hold all substantial rights? Scope, sublicensing, sue, settle, retained rights, reversion
  • First-right structure with a response period
  • Licensor's agreement to be joined, at the licensee's cost
  • Control of litigation and settlement approval protecting rights outside the field
  • Allocation of recoveries after costs
  • Notice and cooperation obligations on discovery of infringement

Section 10 — Representations, indemnity, insurance

  • Ownership and authority to grant
  • No conflicting prior grants or encumbrances
  • No knowledge of invalidity, knowledge-qualified
  • Disclosure of litigation and post-grant proceedings
  • Understand what is not warranted: validity, non-infringement of third-party rights, freedom to operate
  • Licensee product liability indemnity and insurance, licensor as additional insured
  • Limitation of liability, with carve-outs

Section 11 — Term, termination, survival

  • Term to the last-to-expire licensed patent, or stated
  • Breach: notice and cure, shorter for payment
  • Good-faith payment disputes carved out of termination
  • Licensee termination for convenience on notice
  • Termination or royalty escalation on validity challenge, limited to challenges the licensee initiates
  • Insolvency, and the bankruptcy protections available to IP licensees — note the different treatment of trademarks
  • Survival: confidentiality, accrued payments, audit for a period, indemnities
  • Sell-off period with royalties payable

Section 12 — Marking and damages

  • Express marking obligation on the licensee, format specified, virtual marking permitted
  • Annual verification right with samples
  • Indemnity for damages lost through failure to mark
  • Recognize that marking does not apply to method-only assertions

Section 13 — Exhaustion analysis (both parties, before signing)

  • Does the licensed article have any reasonable non-infringing use? If not, its sale exhausts the claims it embodies
  • Are method claims practised when the article is used as intended? Those are exhausted too
  • Are there claims directed to different actors, not embodied in the article, expressly reserved?
  • Is the field limitation on the grant or in a covenant?
  • Licensee: do you already have rights through an authorized supplier's sale?
  • Is the transaction a sale, or a genuine lease or service arrangement? Substance governs
  • Do settlement covenants extend to customers, and what do they exhaust?

Section 14 — After signature

  • One-page plain-language summary circulated to finance, engineering, sales, and supply chain
  • Calendar: reports, payments, minimums, milestones, audit windows, diligence deadlines, expirations and step-downs, notice deadlines, insurance
  • Royalty reporting configured in the finance system, with the licence's required fields
  • Annual roadmap review against the field definition
  • Watch list: assignment, change of control, co-owner licences, post-grant proceedings, acquisitions
  • Complete file maintained for the diligence that will come

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