License Agreements

A license agreement is an agreement under which a licensor grants another party permission to use specified intellectual property or related rights, subject to agreed terms and conditions. The property can include inventions, patents, copyrights, trade secrets, trademarks, technical data, know-how and industrial designs.

In Canadian defence procurement, a license agreement may cover manufacturing rights, technical assistance and the right to use or modify technical material. CanadaBuys guidance on royalty payments and licence agreements directs contracting authorities to plan for these agreements whenever royalty payments, technical assistance agreements or manufacturing licences are required or anticipated.

What a license agreement can cover

The CanadaBuys guidance lists the possible subject matter of a licence agreement: inventions, patents, copyrights, trade secrets, trademarks, technical data, know-how and industrial designs. Related arrangements named in the same guidance are royalty payments, technical assistance agreements and manufacturing licences.

When Canada holds the licence, negotiations can address several areas:

• Manufacturing rights
• Use of the licensor's patents and designs
• Technical assistance
• Plans, drawings and specifications
• Rights to modify, or arrange modification of, technical material
• Rights to build or repair, or to arrange those activities through another party

Who enters the licence in defence contracts

In some defence contracts, a contractor needs technical assistance or manufacturing licences from third parties. Normally, the contractor enters into those agreements. In some circumstances, Canada enters the licence agreement in its own name instead. The solicitation and the resulting contract set out which approach applies.

The wider framework sits in the Government of Canada's defence and marine intellectual property principles. These help define IP requirements, draft contracts and design bid evaluations, and they align with the federal Contracting Policy and the Policy on Title to Intellectual Property Arising Under Crown Procurement Contracts.

Licence fees in National Defence software purchases

Licence terms also appear in routine National Defence purchasing. Public contract records describe application software, application-development and delivery software, and client software as "license/maintenance fees." One National Defence contract record covers license and maintenance fees for application software, including commercial off-the-shelf (COTS) software. Another contract record shows a competitively sourced contract against a supply arrangement for the same category. Vendors named in these records include Microsoft, Salesforce Canada and General Dynamics Mission Systems.

Licensing of NATO standardization documents

NATO also uses licensing for its own documents. Its standardization policy states that the NATO Standardization Office owns the copyrights in NATO standardization documents. It grants specified countries the right to reproduce, translate, adapt, issue or communicate those documents, including certain sublicensing rights.

What it means for a supplier bidding on Canadian public contracts

A supplier's obligations depend on the solicitation and the resulting contract. Depending on the requirement, a supplier may need to:

• Obtain a third-party technical assistance or manufacturing licence
• Pay or include royalties
• Show that it holds the rights needed to supply, manufacture, modify, maintain or support the deliverable
• Enter the licence in its own name or, where required, support Canada's licence negotiations
• Observe restrictions on use, reproduction, modification, disclosure, sublicensing and commercial exploitation
• Comply with software licence and maintenance terms for commercial software

Take the exact requirements from the solicitation, the statement of work, the contract clauses and any licence terms they incorporate. Identify early which licences your bid depends on and who will hold them.