During the licensing agreement negotiation process, the parties should stipulate the terms or termination and the circumstances under which termination rights can be evoked. Generally, either the licensee or the licensor can terminate the licensing agreement for cause, but there are more restrictions where there is no event that triggers the right of termination. It is important for both parties to the agreement that they fully understand their rights to terminate the agreement and the rights of termination vested in the other party to the contract.
Contract termination can result from multiple different events or circumstances, depending upon the agreement signed by the parties. If a material term of the licensing agreement is breached, the non-breaching party will likely have a right to terminate the contract. Additionally, if an infringement lawsuit is successful, the contract may be terminated as a matter of law. Additionally, licensing agreements may include automatic end dates, where the contract automatically terminates on a predefined date.
After contract termination, the patented product is free to be licensed again, even if the terminated contract was an exclusive license. While the patent owner always retained proprietary ownership rights during the licensing period, the licensee had exclusive license rights and was protected from the licensor granting licenses to other third parties. Once the licensing agreement is terminated, the product is in the sole ownership and control of the patent owners and can be licensed or assigned in any way the licensors choose.