A cross-licensing agreement is a

contract A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...

between two or more parties where each party grants rights to their

intellectual property Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, cop ...

to the other parties.

Patent law

patent law A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an enabling disclosure of the invention."A p ...

, a cross-licensing agreement is an agreement according to which two or more parties grant a license to each other for the exploitation of the subject-matter claimed in one or more of the patents each owns. Usually, this type of agreement happens between two parties in order to avoid litigation or to settle an infringement dispute. Very often, the patents that each party owns covers different essential aspects of a given commercial product. Thus by cross licensing, each party maintains their freedom to bring the commercial product to market. The term "cross licensing" implies that neither party pays monetary

royalties A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset o ...

to the other party, although this may be the case. For example,

Microsoft Microsoft Corporation is an American multinational technology corporation producing computer software, consumer electronics, personal computers, and related services headquartered at the Microsoft Redmond campus located in Redmond, Washing ...

and

JVC JVC (short for Japan Victor Company) is a Japanese brand owned by JVCKenwood corporation. Founded in 1927 as the Victor Talking Machine Company of Japan and later as , the company is best known for introducing Japan's first televisions and for ...

entered into a cross license agreement in January 2008. Each party, therefore, is able to practice the inventions covered by the patents included in the agreement. This benefits competition by allowing each more freedom to design products covered by the other's patents without provoking a

patent infringement Patent infringement is the commission of a prohibited act with respect to a patented invention without permission from the patent holder. Permission may typically be granted in the form of a license. The definition of patent infringement may v ...

lawsuit. Parties that enter into cross-licensing agreements must be careful not to violate

antitrust Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...

laws and regulations. This can easily become a complex issue, involving (as far as the European Union is concerned) Art. 101 and 102 of the

Treaty on the Functioning of the European Union The Treaty on the Functioning of the European Union (TFEU) is one of two treaties forming the Treaties of the European Union, constitutional basis of the European Union (EU), the other being the Treaty on European Union (TEU). It was previously ...

(TFEU), previously Art. 81 and 82 of the

EC Treaty The Treaty of Rome, or EEC Treaty (officially the Treaty establishing the European Economic Community), brought about the creation of the European Economic Community (EEC), the best known of the European Communities (EC). The treaty was signe ...

, (abuse of dominant position, etc.) as well as licensing directives, cartels, etc. Some companies file patent applications primarily to be able to cross license the resulting patents, as opposed to trying to stop a competitor from bringing a product to market. In the early 1990s, for example,

Taiwan Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the nort ...

ese original design manufacturers, such as

Hon Hai Hon Hai Precision Industry Co., Ltd., trading as Hon Hai Technology Group in China and Taiwan and Foxconn internationally, is a Taiwanese multinational electronics contract manufacturer established in 1974 with headquarters in Tucheng, New ...

, rapidly increased their patent filings after their US competitors brought patent infringement lawsuits against them. They used the patents to cross license. One of the limitations of cross licensing is that it is ineffective against

patent holding companies A patent holding company (PHC) exists to hold patents on behalf of one or more other companies but does not necessarily manufacture products or supply services based upon the patents held. Patent holding companies may exist for tax reasons. Pate ...

. The primary business of a patent holding company is to license patents in exchange for a monetary royalty. Thus, they have no need for rights to practice other companies' patents. These companies are often referred to pejoratively as

patent troll In international law and business, patent trolling or patent hoarding is a categorical or pejorative term applied to a person or company that attempts to enforce patent rights against accused infringers far beyond the patent's actual value or ...

s. The economics literature has shown that firms with high capital intensities are more likely to strike a cross-licensing deal. Galasso, A. (2012), Broad Cross-License Negotiations, Journal of Economics & Management Strategy Volume 21, Issue 4, pages 873–911. http://onlinelibrary.wiley.com/doi/10.1111/j.1530-9134.2012.00348.x/abstract

Non patent law

Other non-patent

such as

copyright A copyright is a type of intellectual property that gives its owner the exclusive right to copy, distribute, adapt, display, and perform a creative work, usually for a limited time. The creative work may be in a literary, artistic, education ...

and

trademark A trademark (also written trade mark or trade-mark) is a type of intellectual property consisting of a recognizable sign, design, or expression that identifies products or services from a particular source and distinguishes them from others ...

can also be cross-licensed. For example, a literary work and an anthology that includes that literary work may be cross-licensed between two publishers. A cross-license for computer software may involve a combination of patent, copyright, and trademark licensing.

References

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External links

Example of patent cross-licensing agreementMicrosoft having issues with Amazon over cross-licensing
Licenses Strategic alliances Patent law

Patent law

Non patent law

See also

References

External links