Expressing Licensee Liability for Sublicensee Misconduct

If a contract provision isn’t the focus of the deal, there’s a good chance people won’t have given it much thought, so there’s a good chance that it doesn’t make sense.

Consider the notion of licensee liability for a sublicensee’s misconduct. Straightforward, right? But how do you express it? I scattered some roach bait traps on EDGAR and looked at (and then cleaned up) what crawled in.

Here’s one attempt:

The Licensee will be liable to the Licensor for all acts and omissions of a sublicensee.

It’s overbroad: acts and omissions that relate exclusively to the business arrangement between the licensee and a sublicensee would be irrelevant to the licensor.

Here’s another attempt:

The Licensee will remain liable for performance of a sublicensee in accordance with this agreement.

That doesn’t make sense: a sublicensee would perform under the sublicense, not the license. It’s not stated what the nexus would be between sublicensee performance and licensee liability under the license.

Let’s try again:

The Licensee will be liable for any act or omission of a sublicensee that is a breach of any of the Licensee’s obligations under this agreement as though it were a breach by the Licensee.

Same problem: there’s no basis for saying that conduct by a sublicensee under the sublicense will constitute breach by the licensee under the license. Adding “as though it were a breach by the Licensee” doesn’t fix that.

Then there’s this:

The Licensee will be liable for any action or omission by a sublicensee that would, if it were an action or omission of the Licensee, have been a breach of this agreement.

That’s better, but it’s not perfect. For example, if the license says that a sublicensee may not sublicense but a sublicensee sublicenses anyway, it would be a bit awkward to express licensee liability by assuming that it was the licensee that had sublicensed: under the license, the licensee can sublicense.

So here’s my take:

The Licensee will be liable for sublicensee conduct that is prohibited under this agreement and sublicensee conduct that would have constituted breach of this agreement if it had been engaged in by the Licensee.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.