With an eye to the third edition of MSCD, I’d like to revisit something that I first discussed in this November 2009 post on AdamsDrafting—the relationship between license-granting language and language of discretion.
Here’s what I said in that earlier blog post:
But more importantly, any discussion of the meaning of contract language has to start with semantics. I suggest that in this case, the semantics indicate that granting language in a license agreement is simply a variant form of language of discretion and as such is simply a creature of the contract, like any other provision.
Consider the follow provisions:
- Acme hereby grants Widgetco a license to use the Marks in …
- Acme hereby grants Widgetco the right to use the Marks in …
- Widgetco may use the Marks in …
They all convey the same meaning. What distinguishes the first from the other two is that it seeks to flag that discretion is being accorded with respect to something that Acme controls. But such control wouldn’t be inconsistent with the other two variants. (In the absence of such control, the first two variants would be preposterous.)
When you can convey the same meaning in different ways yet you accord a special significance to one of those ways, then—Hey presto!—you have magic-wordery, the enemy of rational drafting. In terms of the semantics, granting a license is just one way to accord a party discretion under a contract. Debating whether a license arises independently of the contract, or instead is covenant not to sue and therefore part of the contract, is to miss the point.
Looking at this issue again, I think that in the appropriate context, license-granting language offers three advantages over language of discretion:
- As mentioned in the earlier blog post, license-granting language makes it clear that discretion is being accorded with respect to something that the licensor controls.
- Granting discretion by means of a thing—a license—allows the drafter to add various adjectives: nonexclusive, irrevocable, perpetual, etc. (That’s something I discussed in this August 2008 post on AdamsDrafting. Note the 30 comments—ah, those were the salad days of blogging!)
- Using the word license allows you also to use the word sublicense. Articulating the notion of A to B to C using language of discretion would be trickier, and wordier.
So I’m at peace with the concept of license-granting language. But when does it make sense to use it? Perhaps whenever you give someone else the right to use your intellectual property.
If you give someone else the right to use tangible property, the word you’d use is lease. So that’s another word that results in language of performance being equivalent to language of discretion.
There are times you would grant only a license (and not a lease) to use real property. A lease denotes the right to exclusive possession, survives a transfer of the grantor’s interest, creates a non-freehold estate, and is freely transferrable, except to the extent the lease expressly restricts assignment or subletting. (Or unless the property is in a code state, scuh as TX or LA.)
A license denotes the right to possession only to the extent necessary to accomplish an agreed purpose, does not create an estate, does not survive a transfer of the grantor’s interest, and is ordinarily not transferrable.
This distinction is not magic wordery, but is inherent in the definitions of lease and license.
Jack: So a lot would be riding on the distinction between “lease” and “license”. I wouldn’t risk it—I’d say exactly what rights are being granted. Ken