Does a Sole Licence Have a Legal Soul?

One of the more interesting aspects of IP licensing is the presence of basic contractual constructs that have no, or little, direct anchor in the law. Sublicensing is one such example, but this Kat will remain mum on this, because there will be an IPKat-sponsored programme on the subject next month here. An even more acute example is the notion of a "sole licence". On this, the Kat wants to share several thoughts.

We are all familiar with "exclusive" and "non-exclusive" licences. Many IP statutes make explicit reference to each of these two types of licence. In the main, an exclusive licence means that the right conferred upon a single licensee is exclusive, even as to the rightsholder, while a non-exclusive licence contemplates multiple licensees and does not exclude use by the licensor (although there is nothing in principle that prevents such a restriction if the licence somehow contained such a provision).

Sometimes a specific IP statute will include a definition of each type of licence; in other instances, case law does the heavy task of providing definitions. This combination of statutory and judicial recognition of exclusive and non-exclusive licences frequently then serves as the basis for fixing certain rights in favour of the licensee. Most notably, an exclusive licensee will often be entitled to sue for infringement (either alone or jointly with the IP rightsholder, depending on the local law), while a non-exclusive licensee will not enjoy a right of suit.

So does this mean that IP licences can be simply divided into two categories--exclusive and non-exclusive? Well, not exactly. As anyone who deals with IP licensing comes to know, there is a third category of IP licence that sometimes shows up--the so-called "sole licence". This Kat has looked long and hard, but he has not found any IP statute that explicitly refers to, much less defines, a "sole licence". [That said, readers are invited to bring any such examples to our attention.]

Even assuming that no such statutory treatment exists for a "sole licence",the fact  remains that the notion of a "sole licence" is sometimes part of an IP licence. Generally, a sole licence means that there is only one licensee; however, unlike an exclusive licence, in a sole licence, the licensor reserves to itself the right to use the licensed IP as well. We say, "generally means" because, ultimately, a sole licence means only that for which the four corners of the licence make provision. A carefully drafted an IP sole licence will include a provision such as that above.

But, not infrequently, the licence will simply refer to a "sole licence" without
further defining the term. What is one supposed to do in such a situation? In particular, when the governing law provides only for an "exclusive" or "non-exclusive" licence, how is one meant to construe a sole licence? We reject at the outset the improbable result that a sole licence is neither an exclusive nor a non-exclusive licence, but is some version of the licensing netherworld, with all the uncertainties that befall anyone or anything unlucky enough to fall into that middle category.

Accordingly, we are left with two choices. In favour of categorizing a sole licence as an exclusive licence, one can point to the fact that if the purpose is to regulate who can sue for infringement, it should not matter whether the licensor is prevented from making use of the licensed IP right or not. However, if the purpose is to ensure that the "exclusive licensee" is functionally equivalent to an assignee, i.e., a person who receives all, or nearly all, the rights of the assignor, the rationale for categorizing a sole licence as a form of exclusive licence is less firm. Moreover, as matter of statutory construction, if the definition of an exclusive licence provides that the right of use excludes the licensor, then, on its face, a sole licence does not meet that statutory requirement.

This Kat has his own tongue--he is not sure of the better position. Readers are invited to provide guidance.