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ARTICLE · 22 FEBRUARY 2014

Deceit In A Licensing Agreement

Where a technology license carries with it an obligation to pay royalties based on revenues, how does the licensor determine if the revenues are accurately reported?

CanadaIntellectual Property

Where a technology license carries with it an obligation to pay royalties based on revenues, how does the licensor determine if the revenues are accurately reported? The sales are known to the licensee, but the licensor has no way of determining what those sales are. Many license agreements impose reporting obligations on the licensee, so that monthly or quarterly sales are reported to the licensor, to enable accurate royalties to be calculated.  In the recent decision in XY, LLC v. Zhu , 2013 BCCA 352 (CanLII), the BC Court of Appeal dealt with a licensee who breached the terms of the technology license agreement, and committed the "tort of deceit" (that's how lawyers say "they lied").

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