Use of “Paid-Up” and “Royalty-Free” in Granting Language

Yesterday I revisited in this post use of sole and exclusive in granting language in a license agreement. Well, we’re not done, because yesterday I saw the following in a contract:

Acme hereby grants Widgetco an irrevocable, worldwide, paid up, royalty-free, exclusive license …

That caused me to wonder about paid-up (it’s a phrasal adjective, so I’d use a hyphen) and royalty-free. So of course I asked the great Mark Anderson (also known as @IPDraughts) what he thought about those terms. This is what he said:

I have always found “paid up, royalty-free” an odd one. I have assumed without knowing that the paid up bit refers to lump sum payments that are not running royalties, but never really understood why US parties thought it necessary to say it. I have to confess that over time I have become inured to it and might have sometimes used this formula, for want of thinking up a better one.

Mark is a prominent IP lawyer, so he has every incentive not to be annoying. Me, I’m under no such constraints, so I permit myself to suggest that paid-up and royalty-free serve no purpose. I say get rid of them.

Other elements in the granting-language litany are unobjectionable. But paid-up and royalty-free simply echo, or fail to echo, what’s accomplished elsewhere in the license agreement.

Regarding paid-up, if the licensee is required to pay anything up-front for the license, that would be specified in the contract, so it would be redundant to say paid-up. (Incidentally, the variant fully paid-up simply add pointless rhetorical emphasis.) If the licensee isn’t required to pay anything, it would be misleading to say paid-up, and it would be redundant to say something like no-fee—the lack of a fee speaks for itself.

Similarly, if there’s a royalty (which is different from an up-front payment), that would be specified in the license agreement. If the licensee isn’t required to pay a royalty, there’s no need to say so, just as there’s no need to say that the licensee won’t be required to face west and hum the Marseillaise on each anniversary of the date of the license agreement.

(By the way, for some general thoughts on granting language, see MSCD 3.31–43, raw materials for which can be found in this post and this post.)

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.