Can You Terminate a Perpetual Licensing Agreement?

September 15, 2018 12:43 pm.

Perpetual licensing agreements must be carefully reviewed.

A perpetual licensing agreement, as the name implies, runs for an indefinite period of time. The agreement allows a licensee rights of access and use in perpetuity, usually for a one-time fee paid to the licensor.

But do these agreements really run until the end of time, or are there circumstances in which you can terminate a perpetual licensing agreement? The answer typically turns on your answers to two other questions:

What language is inside your licensing agreement?

In the United States, the issue of terminating a perpetual licensing agreement is not exactly settled. The law is somewhat gray on the matter. However, if you have included certain language in your licensing agreement, termination could be a simpler question. For instance, if your agreement says it is “revocable at will,” it is quite likely you can terminate the agreement for any reason at any time.

On the other hand, if your agreement contains the term “irrevocable,” it could be far more difficult to terminate. The possibility of termination will rest on the entirety of the agreement and its interpretation. These two scenarios demonstrate how important it is to make sure your original agreement contains the right language for your business.

Has the licensee committed a breach of the agreement?

Even under a truly irrevocable perpetual licensing agreement, if the licensee commits a material breach, you have the right to terminate the agreement. Examples of material breaches might include:

  • Sharing or sublicensing with a third party on the part of the licensee
  • Use of the property for commercial purposes on the part of the licensee
  • Copy-making of the property on the part of the licensee

Your agreement should contain language regarding restrictions, as well as descriptions of specific conduct that would constitute a material breach. In the event of a material breach, you can treat the licensing agreement as terminated, and you might be entitled to damages against the licensee.

If your licensing agreement is silent on restrictions, revocability, and termination (meaning it contains no language regarding these issues), your ability to terminate likely depends on the duration of the agreement. Many courts have found that non-exclusive perpetual agreements that are silent as to revocability are revocable at will. In regard to non-exclusive term agreements (which set a fixed timeframe for the licensee’s rights) that are silent as to revocability, many courts have conversely found that they are not capable of being terminated during the term.

That said, it is always wise to rely on precise drafting, rather than default rules. The majority finding on this issue can shift in your jurisdiction, but if your agreement is clear from the beginning, you won’t have to worry about terminating according to your best interests.

To ensure you have the right licensing agreement to protect your property, contact Larsen Law Offices, LLC, today. You can schedule a consultation with an experienced Colorado licensing attorney by calling (303) 520-6030.