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What are the standard clauses for a trade secret license agreement?

Introduction

A trade secret license agreement is a legal contract that allows one party (the licensor) to grant another party (the licensee) the right to use its trade secrets under specified conditions. Trade secrets are a form of intellectual property that includes formulas, practices, processes, designs, instruments, or compilations of information that provide a business advantage over competitors who do not know or use it. In Kenya, trade secrets are protected under various laws, including the Industrial Property Act, 2001, and the common law principles of confidentiality.

Table of Contents

  1. Definition of Trade Secrets

  2. Grant of License

  3. Confidentiality Obligations

  4. Term and Termination

  5. Consideration

  6. Use of Trade Secrets

  7. Ownership and Intellectual Property Rights

  8. Warranties and Representations

  9. Indemnification

  10. Dispute Resolution

  11. Governing Law

  12. Miscellaneous Provisions

1. Definition of Trade Secrets

Sources:

  • Industrial Property Act, 2001

  • Common Law Principles of Confidentiality

The agreement should clearly define what constitutes a trade secret. This section typically includes:

  • Description of Trade Secrets: A detailed description of the trade secrets being licensed.

  • Scope of Trade Secrets: The scope and limitations of what is considered a trade secret under the agreement.

2. Grant of License

Sources:

  • Industrial Property Act, 2001, Section 30

This clause specifies the rights being granted to the licensee. It includes:

  • Scope of License: Whether the license is exclusive or non-exclusive.

  • Territory: The geographical area where the licensee can use the trade secrets.

  • Duration: The period during which the license is valid.

3. Confidentiality Obligations

Sources:

  • Common Law Principles of Confidentiality

This section outlines the confidentiality obligations of the licensee, including:

  • Non-Disclosure: The licensee must not disclose the trade secrets to third parties.

  • Security Measures: The licensee must take reasonable steps to protect the trade secrets.

  • Permitted Disclosures: Situations where disclosure is permitted, such as to employees who need to know the information.

4. Term and Termination

Sources:

  • Contract Act, Cap 23

This clause outlines the duration of the agreement and the conditions under which it can be terminated:

  • Term: The initial term of the agreement and any renewal terms.

  • Termination for Cause: Conditions under which either party can terminate the agreement for breach.

  • Termination for Convenience: Conditions under which either party can terminate the agreement without cause.

5. Consideration

Sources:

  • Contract Act, Cap 23

This section specifies the financial terms of the agreement, including:

  • License Fees: The amount and frequency of payments.

  • Royalties: Any royalties based on the use of the trade secrets.

  • Payment Terms: The method and timing of payments.

6. Use of Trade Secrets

Sources:

  • Industrial Property Act, 2001

This clause outlines how the licensee is permitted to use the trade secrets:

  • Permitted Uses: Specific uses that are allowed under the agreement.

  • Prohibited Uses: Uses that are not allowed.

  • Compliance with Laws: The licensee must comply with all applicable laws and regulations.

7. Ownership and Intellectual Property Rights

Sources:

  • Industrial Property Act, 2001

This section clarifies the ownership of the trade secrets and any improvements made by the licensee:

  • Ownership: The licensor retains ownership of the trade secrets.

  • Improvements: Any improvements made by the licensee may be owned by the licensor or jointly owned, depending on the agreement.

8. Warranties and Representations

Sources:

  • Contract Act, Cap 23

This clause includes the warranties and representations made by both parties:

  • Licensor Warranties: The licensor warrants that it has the right to grant the license and that the trade secrets do not infringe on third-party rights.

  • Licensee Warranties: The licensee warrants that it will use the trade secrets in compliance with the agreement.

9. Indemnification

Sources:

  • Contract Act, Cap 23

This section outlines the indemnification obligations of each party:

  • Licensor Indemnification: The licensor agrees to indemnify the licensee against any claims arising from the use of the trade secrets.

  • Licensee Indemnification: The licensee agrees to indemnify the licensor against any claims arising from the licensee's use of the trade secrets.

10. Dispute Resolution

Sources:

  • Arbitration Act, 1995

This clause specifies the methods for resolving disputes:

  • Negotiation: The parties agree to first attempt to resolve disputes through negotiation.

  • Arbitration: If negotiation fails, disputes will be resolved through arbitration.

  • Jurisdiction: The jurisdiction where disputes will be resolved.

11. Governing Law

Sources:

  • Contract Act, Cap 23

This section specifies the governing law of the agreement:

  • Applicable Law: The laws of Kenya will govern the agreement.

  • Venue: The venue for any legal proceedings.

12. Miscellaneous Provisions

Sources:

  • Contract Act, Cap 23

This section includes various standard clauses, such as:

  • Entire Agreement: This agreement constitutes the entire agreement between the parties.

  • Amendments: Any amendments must be in writing and signed by both parties.

  • Severability: If any provision is found to be invalid, the remaining provisions will remain in effect.

  • Notices: The method and address for giving notices under the agreement.

Conclusion

A trade secret license agreement is a crucial document that protects the interests of both the licensor and the licensee. By including these standard clauses, the parties can ensure that their rights and obligations are clearly defined and legally enforceable. It is advisable to consult with a legal professional to tailor the agreement to the specific needs of the parties involved.

Answered by mwakili.com