Re: transferability vs. assignability

milone[_at_]mindspring.com wrote:

>Could someone give me an example of the

 >difference between transfer rights and assignment rights
 >(i.e. "Vendor hereby grants User a non-transferable,
 >non-assignable, non-sublicensable right to use the Software...").

A license is contract (covenant) not to sue for infringement. It is therefore a creature of state law, and whether a right or obligation under it is transferable or assignable will be principally one of state law.

When using "transfer" my general understanding is one of title; when using "assignment" my general understanding is in connection with rights (or obligations).

So, a possible distinction in the above example is that a single contract right under the agreement is not assignable (say a right to grantback royalties), and the contract itself as a whole, is not transferable. Having said that, because these are contracts, the real issue is, what was the intent of the parties? The above language is IMO just belts and suspenders to make clear that neither a partial nor complete transfer or assignment of any of the contractual rights are permitted.

Another distinction may be that if the contract holder is an entity, and its owners transfer their stock, that could be an implied transfer of the entire contract, but it likely would not be an assignment of any rights under the agreement.

>Is there ever a scenario where the license could be
 > transferable, but not assignable (or vice versa)?

Yes, the most typical one is that if you allow an assignment to an affiliate, for example, the assignor remains liable (under general assignment law) for the performance of the agreement; in that case normally you would not however, allow a transfer (in a transfer, the transferor normally does not retain any ongoing obligations for performance). However, in my drafting I would not rely on the common understanding, but rather would use express language to be clear as to what a licensee can do.

>How do these rights affect the ability to sublicense?

Although I would never counsel this, theoretically if a licensee has a right to assign the license right to someone, its possible to argue this is a right to sublicense. The problem is that in a sublicense the sub-licensor retains a license right (i.e. now there are effectively 2 licensees); in an assignment, a single right is assigned, so only the second party (assignee) has a license. In a well drafted license, a right to sublicense is not normally implied because the licensor will reserve all rights not expressly granted. However, poorly drafted licenses can result in implied rights to sublicense (best example: if a license to software permits the licensee to "use" the software without otherwise restricting what the parties mean by "use" - depending on what the software does, it might be implied that the licensee can grant a sublicense as part of her right to "use" the software.)

clear as mud, eh?

best regards, mike oliver
Bowie & Jensen, LLC Received on Thu Nov 20 2003 - 21:30:32 GMT