The License Option Agreement serves as a crucial intermediate step in intellectual property transactions under United States law, providing potential licensees with the opportunity to evaluate and secure rights to intellectual property before committing to a full license. This document type is particularly valuable when parties need time for due diligence, technology evaluation, or market assessment before entering into a full license agreement. The agreement typically specifies the option fee, duration, exercise conditions, and key terms of the potential future license. Common use cases include technology transfer from research institutions, software licensing, patent commercialization, and pharmaceutical development agreements. The License Option Agreement must comply with federal intellectual property laws, state contract laws, and industry-specific regulations, while addressing potential antitrust concerns for exclusive arrangements.
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1. Parties: Identification of the parties entering into the agreement, including full legal names and addresses
2. Background: Context of the agreement, including description of the intellectual property and parties' intentions
3. Definitions: Defined terms used throughout the agreement
4. Grant of Option: Terms of the option, including scope, exclusivity, and territory
5. Option Period: Duration of the option and any extension provisions
6. Option Fee: Payment terms for the option, including amount and payment schedule
7. Exercise of Option: Process and requirements for exercising the option
8. License Terms: Key terms of the license that will take effect upon option exercise
9. Confidentiality: Obligations regarding confidential information exchanged during the option period
10. Representations and Warranties: Statements of fact and promises by both parties
11. Term and Termination: Duration of the agreement and circumstances for early termination
12. General Provisions: Standard legal provisions including governing law, notices, and assignment
1. Due Diligence: Rights and process for conducting due diligence during the option period
2. Development Obligations: Include when the option period involves continued development of the technology
3. Regulatory Compliance: Include for regulated industries or technologies
4. Sub-licensing Rights: Include when sub-licensing may be permitted under the future license
5. Insurance: Include when specific insurance coverage is required during the option period
6. Source Code Escrow: Include for software-related options where source code access may be required
7. Performance Milestones: Include when the option or license is contingent on achieving specific milestones
8. Export Control: Include for technologies subject to export control regulations
1. Schedule A - Licensed IP: Detailed description of the intellectual property covered by the option
2. Schedule B - Option Fee Schedule: Detailed breakdown of option fees and payment terms
3. Schedule C - Form of License Agreement: Draft of the full license agreement to be executed upon option exercise
4. Schedule D - Technical Specifications: Technical details of the technology or IP being optioned
5. Schedule E - Due Diligence Requirements: List of materials and information to be provided for due diligence
6. Appendix 1 - Milestone Requirements: Detailed description of any performance or development milestones
7. Appendix 2 - Royalty Calculations: Methodology for calculating royalties under the future license
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