License-Granting Language Is Just Another Contract Provision

Yesterday I revisited the question of the relationship between a license and the contract that grants the license.

This issue arose in connection with a trademark license agreement I’ve been redrafting. The original version says that the license is “nonassignable,” and I’ve been contemplating deleting that adjective on the grounds that the question of assignment of the license would be covered by the general nonassignment provision included in the contract boilerplate.

If this all sounds familiar, it’s because it cropped up in this August 2008 post on license-agreement granting language. So I revisited the issue with Michael Fleming, who in the comments to that post was the principal advocate of the position that a license is distinct from the contract granting that license. Yesterday he repeated in an email to me the gist of his argument:

I’m still of a mind that the license arises independently from the contract, much like a purchase agreement for a house is a different thing than the house itself. The license is the widget. Thus, rules that apply to the license should be clearly attached to the license separate from the rules that apply to the agreement, much as you would attach a covenant that goes with the land in a real estate transaction.

I’m not crazy about the house analogy. For one thing, my selling you a house is very different from my letting you use my trademarks—in the former transaction you get the widget, whereas in the latter you just get the right to use the widget.

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.

I haven’t yet researched how this plays out in the caselaw—as long as I’m clear in my drafting, I needn’t concern myself too much with other people’s messes. But it would be rash of me to expect the rest of the world to think like I do: Although I think it’s only logical to treat license-granting language as just another contract provision, I’ll make it clear, for purposes of the trademark license agreement I’m redrafting, that the general nonassignment provision applies to the license-granting language.

I imagine some people will have strong views on this subject. I’d be happy to hear them.

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.