Limitations on the License Grant. The parties should note the difference between words that define the scope of the license or create conditions regarding the exercise of the customer’s rights, and words that are merely contractual cove- nants. This distinction is important because action outside the scope of a license (if within the vendor’s IP rights) is infringement of the vendor’s IP, and the vendor will have access to the many owner- favorable statutory provisions under the IP laws.
Limitations on the License Grant. The parties should note the difference between words that define the scope of the license or create conditions regarding the exercise of the customer’s rights, and words that are merely contractual cove- nants. This distinction is important because action outside the scope of a license (if within the vendor’s IP rights) is infringement of the vendor’s IP, and the vendor will have access to the many owner- favorable statutory provisions under the IP laws. In contrast, a breach of a contractual covenant may lead only to a breach of contract claim with the need to prove, among other things, vendor’s damages. Also, a breach of a contractual covenant may not necessarily give the vendor the right to terminate the license grant and prevent the customer’s continuing use of the technology. Drafting Tip for Vendors Try to incorporate all significant limitations on the customer’s license rights into the license grant provisions themselves.
