Charles R. McManis, and Barbara A. Wrigley
|Copyright © 2005 Carolina Academic Press. For permission, see CMI.|
Problem 11: Enforcement Issues and Terms
While at Contair, Janson worked for many years inventing and developing ceramic materials for brake linings and engine and transmission parts. Contair holds more than 40 U.S. and foreign patents on the ceramic material and various methods of manufacturing it. While at Contair, Janson had discovered that the ceramic in some forms could be an extremely inexpensive and potent fire retardant. With sufficient capital investment, Janson claims that his company could develop and sell numerous fire retardant products, from building materials to children's clothing.
The Vice President shows you the following term sheet that summarizes all the agreed terms to date:
The Vice President would like to close a license deal with Janson Ceramix quickly. He would like to do a short and simple agreement, two or three pages at the most, based upon the term sheet. He sees this as a handshake deal between two long-time colleagues who contemplate a continued close working relationship. Janson Ceramix is in a hurry because Janson is currently trying to attract venture capital and needs the license to show potential investors.
Write a memo to the Vice President that (1) lists any key terms missing from the term sheet, (2) identifies terms that should be modified or deleted, and (3) describes the potential risks of the deal to Contair. Where possible, support your opinions with examples from case law that demonstrate the problems encountered by other companies that licensed out under similar circumstances.