24 February 2017Jurisdiction reportsMichiel Rijsdijk

The value of checking old licences

That outcome would highlight how profitable it can be to check compliance with relatively old licensing agreements.

In 1984 a Dutch foundation specialising in cancer research concluded a patent licensing agreement with an American pharmaceutical company. The pharma company had to pay royalties to the foundation in the form of a percentage of net sales of licensed products. There was a certain discount formula that could be applied under specified circumstances. The application of the formula later became the subject of debate between the parties.

It wasn’t until 2010 that the foundation requested access for its accountant to the administration of the pharma company. The parties then argued about the manner in which royalties had to be calculated, ie, the amount to be paid by the pharma company to the foundation and the applied discount. The foundation believed that the pharma company had wrongfully applied the discount, which had resulted in a sum of royalties paid over more than two decades that was too low.

The foundation requested full compliance with the licensing agreement, ie, payment of the royalties and damages caused by the failure/tort of the pharma company.

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