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Excerpt from Practical Law's Practice Note, Data as IP and Data License Agreements
In today's technology-rich environment, companies increasingly recognize the value of data as a business asset that should be protected and can be exploited through licensing to third parties. Companies and their counsel therefore can encounter a range of agreements that implicate the protection and treatment of data and related intellectual property (IP) rights. Where one party is seeking to exploit a data feed or has developed a database it wishes to license, data issues may be the specific focus of a transaction. However, data issues also arise as an ancillary consideration in other licenses and commercial transactions, in particular technology services arrangements.
Because data may be protected by one or more IP right, a third party's use of data requires a license from the data owner or a sublicense from a party licensed by the owner to grant sublicenses to the data. While similar in some respects to other types of IP licenses, data licenses present several unique licensing issues concerning, for example:
Among other reasons, this is because a party, for example, a service vendor, may:
For example, in a transaction where a vendor is processing and generating data from data received from the customer in connection with the vendor's provision of services to the customer, the parties will likely have competing interests. The vendor in this case may want to:
The customer typically will want to:
A data license also should address the manner of delivery, maintenance and control of the data, as well as data security policies, practices and protocols, in particular where the data comprises personal or sensitive financial, technical or commercial information.
In any data licensing transaction, a key negotiated point is accounting for the licensor's ownership of and the licensee's permitted use of the data.
The party licensing out the data, whether it is a vendor or customer, should ensure the agreement accurately addresses its ownership of or other rights in the data by:
Where the licensor owns the data, it should seek a specific acknowledgment from the licensee that the data provided under the agreement is the licensor's sole and exclusive property. In addition, to achieve the maximum scope of protection for its data, the licensor should seek acknowledgements that:
In some circumstances, an appropriately narrow definition of licensed data will be appropriate. For example, in a data feed agreement where the licensee is not permitted to generate any derived data. This will help ensure:
However, in a services agreement, the customer may want to use a broader definition to capture all data the vendor collects or receives directly or indirectly from the customer to perform the services and any related data resulting from services performed by or on behalf of the vendor for the customer. In this case, the definition may help prevent ambiguity regarding the service provider's data ownership. For example, the agreement may:
Both the data licensor and licensee should carefully consider legal and business considerations regarding data use. The data licensor should consider what rights it can grant consistent with its business model. The licensor will usually seek to limit use of the data by the licensee. For example, where data is used by a vendor-licensee on behalf of a customer-licensor in a services relationship, the licensor typically:
The data licensee must consider what rights it needs and expects. It should ensure that the license is sufficiently broad to address all anticipated uses of the data. For example, a service provider that receives a license to its customer's data may seek to analyze and use customer data for the provider's own commercial benefit. It also may argue that the services depend on the provider's ancillary use of its customer's data, for example, to aggregate the data to provide data trending and analysis to its customer and similarly situated persons.
Where the customer-licensor finds the vendor-licensee's ancillary use of data to be acceptable, it should specify in the agreement:
Daniel Glazer, Henry Lebowitz and Jason Greenberg, Fried, Frank, Harris, Shriver & Jacobson LLP and Practical Law Intellectual Property & Technology
For more information on Data Licensing, see Practical Law's Practice Note, Data as IP and Data License Agreements
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