Licence agreements: avoiding the traps

Taking care at the draft stage of a licensing agreement to cover all the possible sources of conflict is the best guarantee of a contract running smoothly in Hungary, says Michael Lantos.

Patent licences

The patent law in Hungary lists several rules which should be taken into account in the matter of concluding licence agreements, but with common intention the parties can depart from these rules:

• The patentee should guarantee towards the licensee that no third party has the right to prevent utilisation by the licensee as granted;
   
• The patentee should also provide a guarantee to the licensee that the patent can be reduced to practice, ie, there is no technical condition that would render utilisation impossible. If this is not the case, it is a ground for immediate termination of the agreement by the licensee. Nevertheless the patentee is not obliged to provide know-how to the licensee (unless specified);
   
• Unless specified otherwise, the licence covers all claims without any territorial or time limitation for all possible kinds of utilisation;
   
• The licence agreement is non-exclusive unless specified otherwise. If exclusivity is specified, the patentee retains the right to use, but exclusivity prohibiting the patentee from use is also possible in the agreement. In case of exclusivity, the patentee can terminate the exclusivity clause if the licensee has not started utilisation as could be normally expected;
   
• The licensee cannot grant a sub-licence unless specified explicitly;
   
• The patentee should inform the licensee on all relevant rights and other circumstances that relate to normal utilisation;
   
• The patent right should be maintained by the patentee;
   
• The agreement lasts until the expiration of the patent term;
   
• The owner of an exclusive right cannot automatically sue a potential infringer. This right is reserved for the patentee. However, if the licensee notices an unlawful utilisation he should request the patentee in writing to sue the infringer. If this does not happen within 30 days, then the licensee can sue in its own name, provided the licence has been recorded in the patent register.

Trademark licences