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A Georgia Intellectual Property Owner Succeeds in Collecting Unpaid Royalties and 18% Interest in License Agreement Dispute

Poole Huffman, LLC

Signing an agreement to license your intellectual property is, not unlike signing a lease to rent your commercial real estate, something you enter into with high expectations. You’ve put in lots of work prior to the execution of that contract, and you expect the arrangement will be profitable for both sides. Of course, that doesn’t always happen. If your licensee has failed to pay you what you’re owed, it may be time to sue to collect that money and perhaps collect interest on top of it. When that becomes necessary, look to an experienced Atlanta commercial litigation attorney to help you get the most from your case.

A great many things in this world can be big business, including camouflage patterns. Indeed, one such designer, who had copyrighted an array of camo patterns, was able to make money by granting licenses to use its designs.

One licensee obtained a license agreement to put the patterns on its energy drink containers. Later on, the energy drink’s sales began to decline, and it fell behind on its royalty payments.

After the designer sued for unpaid royalties, the licensee tried to escape paying by arguing that the designer’s failure to pursue action sooner constituted a waiver. Fortunately for the designer, it had a strong agreement that stymied such a litigation tactic.

The parties’ license agreement specifically said that “any failure… to enforce, at any time, any of the provisions of this Agreement or any rights or remedies with respect thereto or to exercise any election therein provided, shall not constitute a waiver of any such provision, right, remedy, or election or in any way affect the validity of this Agreement.” That provision was broad enough to doom the licensee’s assertion of a waiver.

The licensee also argued that its assignment of the license agreement – with the designer’s consent – constituted a novation. That argument was important because, if it was a novation, then the assignment would effectively extinguish the designer’s claims against the licensee.

This assignment, however, was not a novation. To be a valid novation, an agreement must reflect “intent to release the original obligor and extinguish his liability.” While the assignment was clear that the assignee would assume all of the licensee’s rights and obligations from the execution date forward, there was nothing in the assignment that indicated that the assignee was agreeing to assume responsibility for the licensee’s unpaid royalties it had already racked up.

Even after you’ve succeeded in holding your licensee liable, your work isn’t done. You also have to ensure that your judgment gives you everything you deserve. In this license case, the agreement called for late payment of royalties to trigger an interest obligation of “an annual rate of 1.5% per month beginning upon the date said royalty payment was due.”

The licensee tried to argue that this meant the obligation was simple interest at 1.5% per year. The court concluded that the agreement actually called for interest that was 1.5% per month, not 1.5% annually.

When you reach the point that you need to pursue commercial litigation, you need a legal team that can not only get you a judgment but also get you the full award of damages you deserve. Count on the knowledgeable contract dispute attorneys at Poole Huffman, LLC and our many years of experience to be that kind of powerful and effective advocate for you. Contact our attorneys online or by calling 404-373-4008 to schedule your confidential consultation.

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