When Do You Need a License?

In this 2011 post and this 2009 post I explored using license-granting language instead of language of discretion. Here’s what MSCD says about this:

Granting language is analogous to language of discretion. Consider [1-4], [1-4a], and [1-4b]. They all convey the same meaning, but granting language using the noun license, as in [1-4], offers two advantages.

First, license-granting language makes it clear that discretion is being accorded with respect to something that the licensor controls.

And second, using the concept of a license allows you also to use, as necessary, the concept of a sublicense. Articulating the notion of A to B to C using language of discretion would be trickier and wordier.

Instead of the granting language in [1-4] you could use the verb license, as in [1-4c], to grant discretion. But using granting language plus the noun license allows the drafter to add adjectives as necessary: nonexclusive, irrevocable, perpetual, and so on. That’s simpler than using adverbs to modify the verb license.

So I’m fine with that. But just because you can use granting language doesn’t mean you should: in what contexts does granting language make sense?

Consider for example the following from a contract in which Acme is agreeing to provide services to the Customer relating to Equipment that Acme sold the Customer:

The Customer hereby grants Acme a perpetual, nonexclusive, and irrevocable license to gather and use data on performance and output of the Covered Equipment …

Why not simply say Acme may use?

I’ll be deeply skeptical if you tell me it has something to do with remedies. We’re not in a magic-words world, where you have to use the word license to magically unlock benefits.

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.

7 thoughts on “When Do You Need a License?”

  1. The formula ‘the Customer hereby grants Acme a perpetual, nonexclusive, and irrevocable licence to use’ does two things that ‘Acme may use’ does not:

    (1) It makes clear that the licence granted is perpetual, nonexclusive, and irrevocable in a way that a simple ‘may use’ does not; and

    (2) It specifies the Customer as the grantor of the licence and makes clear that the language is performative rather than declarative, ie that the Customer is granting Acme leave to use and is not merely observing that Acme has such leave from an unspecified source.

    A drafter could probably accomplish both goals with ‘Acme hereby may use’, but yow!

    • In language of discretion, one generally doesn’t bother with the perpetual, nonexclusive, irrevocable sort of stuff, but if someone feels it’s necessary, then add it to language of discretion.

      And if your second point were relevant, we would have dispensed with language of discretion long ago.

    • Wright:

      I’ve been thinking about “Acme may use X. This license is perpetual, except that … .”

      That approach uses language of discretion (which is the core of a license), and then uses language of policy to define its characteristics, and also make clear that we’re talking about a license for purposes like tax characterizations.

      I’m not sure I mike my idea, though.


      • If you’ll allow me to chime in :-) you’re using the word license, which unnecessary confuses things. Just say during the term of this agreement and thereafter may use.

      • Dear Chris,

        1/ I agree with Ken that drafters should use ‘may’ to express grants of discretion unless sublicensing, taxes, or other sufficient reasons require another way.

        2/ I agree with you that discretion is the core of a licence, so I’m uneasy with MSCD’s assertion that ‘[g]ranting language is analogous to language of discretion’. That sounds to me like ‘animals are analogous to chickens’. I’d rather say, ‘chickens are one kind of animal’ and ‘language of discretion is one kind of granting language’. That’s MSCD heresy at this point, but today’s heresy may be tomorrow’s orthodoxy. Or maybe Ken will show me my error, and I’ll recant. Best regards.


  2. Not remedies, but time periods need to be addressed in the language of discretion. When can Acme gather the data and for how long is Acme permitted to use it? Another potential factor is field of use, which various specific areas of IP law permit to be restricted. Identifying something as a license to particular IP may shoehorn the restrictions. Of course the IP is seldom explicitly identified, so that language of discretion is no better or worse than licensing language for the restrictive purposes.

    • The additional information you suggest could probably be added to language of discretion.

      I suspect where I’ll end up is that you use granting language if (1) you want to add adjectives, (2) it’s a context where sublicensing makes sense, or (3) it’s a context where people conventionally use granting language. I’m not convinced that my example in the post falls into any of those categories.


Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.