Briefing Note – The Nature of Exclusive Licences

The majority of software and media works are licensed on a non-exclusive basis. Granting an exclusive license may have unintended implications for the media and software suppliers.

Nature of an Exclusive Licence

An exclusive licence is granted where copyright owner permits a licensee to use the copyright work. In addition to the usual rights granted as a licensee, an exclusive licence is one where the licensor promises not to grant any other licences and promises not exploit the work themselves. It may be considered the equivalent of a lease for intangible property. The legal consequence is that the licence confers a right in respect of the copyright work to the exclusion of all others including the licensor.

Statutory Status

An exclusive licence confers on the licensee a ‘statutory procedural status’ that is equivalent to that of the proprietor. The most significant aspect of this is that an exclusive licensee can sue infringers without having to persuade the proprietor to take action on their behalf, unlike a bare licensee. According to the Copyright, Designs and Patents Act, an exclusive licensee has the same rights and remedies in respect of matters occurring after the grant of the licence as he or she would have if the licence had been an assignment. An exclusive licensee is given the same rights as a copyright owner and therefore has the right to bring proceedings in respect of any infringement of the copyright. The copyright owner and exclusive licensee are both permitted to bring an action. Exclusive licences of legal interests in copyright must be in writing and signed by or on behalf of the assignor should the licensee wishes to take advantage of his statutory entitlement to commence proceedings for copyright infringement.

Exclusive Licence v Assignment

The grant of an exclusive licence may be considered tantamount to an assignment, though there are some legal differences. Firstly, an assignee becomes the copyright owner, whereas an exclusive licensee does not. Therefore, the remedies available to the exclusive licensee are limited to those that arise in an action for breach of contract against the copyright owner. In addition, the rights given to licensees are less certain and can be defeated at the hands of a purchaser in good faith for valuable consideration and without notice. Finally, a copyright owner who wishes to permit another to exploit a work can retain better protection by giving an exclusive license.

Unintentional Assignment of Copyright?

Where clear and unambiguous language is not used, it may be difficult to determine whether a copyright owner has assigned their copyright or granted an exclusive licence. Whether a person is an exclusive licensee or an assignee is a matter of construction of the agreement. It is dependent upon whether there is evidence from which an intention to assign can be inferred. The way in which the parties describe the arrangement will be influential, not conclusive. Use of terms such as ‘grant’, ‘sole’, and ‘exclusive rights’ and provisions on ‘retransfer’ if the copyright is not exploited, might indicate an assignment. However, these descriptions may be ignored if the tenor of the agreement suggests that in substance there is an assignment. But in all cases the courts are aware of linguistic formalism and will infer the intention of the parties upon consideration of all the circumstances surrounding the grant of the licence.