The Legal Framework of Licence Negotiation
Negotiating an intellectual property licence is built in two steps: first, the content of the contract must be complete and precise; then, the process of negotiation must be in good faith. Under Article 40 of the Law on Copyright, a licence contract must provide for a precise description of the work to be used — its title, volume and genre — the concrete manner of use, the term and territory of the contract, the procedure for determining the royalty or its amount for each manner of use, and the procedure and term of payment. The right to every manner of use not directly provided for in the contract remains with the author or other right holder — a rule that creates balance in negotiations: using an unspecified format requires a new negotiation.
The Legal Consequences of Gaps in the Contract
The law also contemplates what happens when an element is missing: where the concrete manner of use is not provided, the contract is deemed concluded for the use that may be considered necessary for fulfilling the parties' intention at conclusion; where no term is fixed, the author or holder may terminate the contract after 3 years from its conclusion, notifying the licensee in writing 6 months beforehand; and where no territory is defined, the contract operates only on the territory of Georgia. In addition, the rights granted may be assigned to others, wholly or partly, only where this is directly provided in the contract; and where the royalty for reproduction is fixed as a sum, the contract must set a maximum print run.
The essential terms of the contract are also named by the law: a licence agreement must provide for an exact description of the work to be used (title, volume, genre), the specific manner of use, the duration and territory of effect, the amount of the royalty or the method of its determination for each manner of use, and the manner and deadline of payment. Where the royalty for reproduction is fixed, a maximum print run must be established; and the granted rights may be passed on to other persons only where this is directly provided for by the contract.