Comments on: The Perils of Providing for Entry into a Contract on “Customary” Terms http://www.adamsdrafting.com/2007/07/12/entry-into-contract-on-customary-terms/ Tue, 31 Jan 2012 01:23:03 +0000 hourly 1 http://wordpress.org/?v=abc By: mike http://www.adamsdrafting.com/2007/07/12/entry-into-contract-on-customary-terms/comment-page-1/#comment-6541 mike Thu, 12 Jul 2007 18:31:19 +0000 http://www.adamsdrafting.com/2007/07/12/entry-into-contract-on-customary-terms/#comment-6541 First, I'd say that agreeing to an "exclusive, perpetual" license isn't necessary kissing a right to a mark goodbye. In a license agreement, "perpetual" is really only another way to say "for the duration of this agreement"--plenty of case law on that. This is because, typically, perpetual (and even irrevocable) licenses are usually subject to the terms of the license agreement and thus ultimately subject to termination if you breach, among other things. Ugly isn't it? Trips up a lot of people. Second, my analysis would follow this: 1. This is merely a "right to purchase... a perpetual, exclusive license" (by the way, yikes! sounds like a naked trademark assignment [bad attorney, bad!]) 2. A right is not the same as an obligation 3. In addition, since the terms are not known so this is actually a right to negotiate for a license 4. The parties must negotiate the missing terms in good faith 5. Failure to reach a good faith license is satisfactory performance. The likely problem, of course, is that the business folks didn't want to spend time negotiating a future trademark license (many of which are in excess of twenty odd pages). I have done agreements where we have attached as an exhibit template agreements and said merely there's a right to negotiate an agreement in substantially the form of Exhibit X. We also always limit that right to negotiate to a period, like 60 days after a triggering event. The obligation then is a negotiation in good faith. First, I’d say that agreeing to an “exclusive, perpetual” license isn’t necessary kissing a right to a mark goodbye. In a license agreement, “perpetual” is really only another way to say “for the duration of this agreement”–plenty of case law on that. This is because, typically, perpetual (and even irrevocable) licenses are usually subject to the terms of the license agreement and thus ultimately subject to termination if you breach, among other things. Ugly isn’t it? Trips up a lot of people.

Second, my analysis would follow this:
1. This is merely a “right to purchase… a perpetual, exclusive license” (by the way, yikes! sounds like a naked trademark assignment [bad attorney, bad!])
2. A right is not the same as an obligation
3. In addition, since the terms are not known so this is actually a right to negotiate for a license
4. The parties must negotiate the missing terms in good faith
5. Failure to reach a good faith license is satisfactory performance.

The likely problem, of course, is that the business folks didn’t want to spend time negotiating a future trademark license (many of which are in excess of twenty odd pages).

I have done agreements where we have attached as an exhibit template agreements and said merely there’s a right to negotiate an agreement in substantially the form of Exhibit X. We also always limit that right to negotiate to a period, like 60 days after a triggering event. The obligation then is a negotiation in good faith.

]]> By: Eric Goldman http://www.adamsdrafting.com/2007/07/12/entry-into-contract-on-customary-terms/comment-page-1/#comment-6540 Eric Goldman Thu, 12 Jul 2007 18:25:56 +0000 http://www.adamsdrafting.com/2007/07/12/entry-into-contract-on-customary-terms/#comment-6540 I think you're right that Gander Mountain got a windfall. On the other hand, these types of trademark licenses are hardly cookie-cutter (and, in fact, a "perpetual" trademark license without quality control provisions may be an oxymoron), so punting the agreement to later may, in practice, have been an agreement to agree. Eric. I think you’re right that Gander Mountain got a windfall. On the other hand, these types of trademark licenses are hardly cookie-cutter (and, in fact, a “perpetual” trademark license without quality control provisions may be an oxymoron), so punting the agreement to later may, in practice, have been an agreement to agree. Eric.

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