A sham license agreement is a term used to refer to an agreement that appears to be a legitimate license agreement but is, in fact, a fraudulent scheme. This type of agreement is usually designed to deceive the public or the parties involved.
In most cases, a sham license agreement is created as a tool for the licensor to retain control of the intellectual property, while the licensee is given a false sense of ownership. The agreement will typically set out strict conditions for the use of the IP, including restrictions on the licensee`s ability to make any modifications or adaptations to it.
One of the most common ways to create a sham license agreement is to include terms that are impossible or impractical for the licensee to comply with. For example, the agreement may stipulate that the licensee must meet certain performance standards, without providing any guidance on what those standards might be.
Another tactic is to include provisions that make it difficult for the licensee to terminate the agreement. This might involve requirements for the payment of a large penalty fee or the forfeiture of all rights to the IP.
Sham license agreements are often used by businesses that are struggling financially, as a way to generate revenue without having to invest in the development of new products or services. They are also commonly used by companies that are looking to protect their intellectual property, but do not want to enter into a full-fledged licensing agreement.
However, sham license agreements are illegal and can result in severe consequences, including fines and legal action. They also damage the reputation of the parties involved and can make it difficult for them to enter into legitimate licensing agreements in the future.
In order to safeguard against sham license agreements, it is important to engage the services of a qualified lawyer, who can provide guidance on the legality of the agreement and ensure that all terms and conditions are reasonable and enforceable.
In conclusion, sham license agreements are fraudulent schemes designed to deceive the public or the parties involved. They are illegal and can cause severe consequences. To avoid being taken in by such agreements, it is essential to engage the services of a qualified lawyer and ensure that all terms and conditions are reasonable and enforceable.