Sub-licence

A sub-licence is the contract by which the licensee of an intellectual property right in turn grants to a third party, the sub-licensee, all or part of the exploitation rights it holds under the head licence. It is not regulated as such by the French Intellectual Property Code, but falls within the regime of patent, trade mark, design or copyright licences, and requires authorisation in the head agreement.

Authorisation to sub-license

A licence is in principle granted in consideration of the licensee’s identity. The right to sub-license is therefore not presumed and must result from an express provision or, at the very least, from the scheme of the agreement. A sub-licence granted without authorisation is a breach by the licensee, which justifies termination of the head licence, and exposes the sub-licensee to an infringement action by the right holder, since it is exploiting without right. Under an exclusive licence, the power to sub-license is often granted, as the exclusive licensee is meant to organise exploitation in its territory, whereas it is rarer in a non-exclusive licence. The head agreement may make the sub-licence subject to the right holder’s approval, limit the number or identity of sub-licensees and require the essential clauses to be flowed down.

Dependence of the sub-licence

A sub-licensee cannot receive more rights than the licensee holds. The sub-licence is limited by the subject matter, territory, term and modes of exploitation of the head licence, and shares its fate. Termination, rescission or expiry of the head licence brings the sub-licence to an end, unless the right holder agrees to maintain it or to step into the licensee’s shoes. The sub-licensee therefore has an interest in obtaining a direct undertaking from the right holder at the outset. Financially, the licensee remains liable for the royalties owed to the right holder, and the head agreement often provides that sub-licensing income falls within the royalty base or is shared.

Enforceability and enforcement of rights

A sub-licence of a patent, trade mark or design must be in writing and is enforceable against third parties only once recorded in the national register, on the same terms as a licence. A sub-licensee has in principle no standing to sue for infringement, which is reserved to the right holder and, under certain conditions, to the exclusive licensee, but it may join the proceedings to obtain compensation for its own loss where its agreement has been recorded. In software licences, the question arises in terms of distribution or resale rights, which follow their own rules, in particular exhaustion for copies sold.

Key points

A sub-licence requires the right holder’s authorisation, cannot exceed the licensee’s rights and falls away with the head licence. It must be in writing and recorded to be enforceable, and does not of itself confer standing to sue for infringement. Check the sub-licensing clause in the head agreement before granting any sub-licence, and obtain from the right holder an undertaking to maintain it should the intermediate licence end.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats is a patent litigation firm. Matters outside that field, such as trade marks, designs, copyright and IT contracts, are handled by practitioners the firm works with regularly, and by the firm itself when they arise in a patent dispute.

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