IP License Agreement Review
When a patent, trademark, copyright, software or know-how license arrives for review and you need a side-specific issue list with redlines before negotiating.
An IP license defines what a business can actually make, sell or protect, sometimes for years. Small drafting choices in the grant, field of use, improvements clause or termination provisions can leave a licensee unable to ship its planned product, or give a licensor's competitor rights to its improvements. Reviewing a license well means testing each provision against the client's real business plan, not just checking it against a generic list.
The prompt pastes the full license and its schedules first, then states which side you represent, the type of licensed IP, the client's purpose, planned products and territory, and the commercial terms agreed. Claude works through eleven areas, from the grant and sublicensing through royalties, improvements, enforcement, warranties and termination, and produces a quoted issue table with severity ratings and suggested redlines. It adds missing provisions, inconsistencies with schedules and questions for the client.
Several license issues turn on law that varies by IP type and jurisdiction, and Claude is told to flag those as research questions rather than state rules. It also cannot verify that the licensed patents or registrations are valid, owned by the licensor, or in force. The attorney should check the IP itself, research the flagged questions, and decide which redlines to pursue with the client before negotiating.
The Prompt
<license_agreement> [PASTE THE FULL LICENSE AGREEMENT, INCLUDING SCHEDULES OF LICENSED IP, ROYALTY EXHIBITS AND ANY RELATED AGREEMENTS] </license_agreement> Context: We represent: [LICENSOR / LICENSEE] Licensed IP: [PATENTS / TRADEMARKS / COPYRIGHT / SOFTWARE / TRADE SECRETS / KNOW-HOW] Client's business purpose: [WHAT THE CLIENT NEEDS THE LICENSE TO DO, OR WHAT IT MUST PROTECT] Planned products, field and territory: [DESCRIPTION] Commercial terms agreed so far: [ROYALTY RATE, MINIMUMS, TERM, EXCLUSIVITY] Governing law: [JURISDICTION] Review this license from our client's side. Cover each of these areas: 1. Grant: scope of rights (make, use, sell, reproduce, modify, distribute, etc.), field of use, territory, exclusivity, and whether the grant matches the business purpose above. 2. Sublicensing and affiliates. 3. Reserved rights and restrictions. 4. Royalties and payments: rates, base, minimums, milestones, reporting, audit rights, late payment. 5. Improvements and derivatives: who owns them, grant-backs, disclosure obligations. 6. Prosecution, maintenance and enforcement of the licensed IP. 7. Warranties, IP indemnity, and limitation of liability. 8. Confidentiality. 9. Term, termination, and effects of termination (sell-off rights, survival, return of materials). 10. Assignment and change of control. 11. Quality control (for trademark licenses). Output an issue table: # | Area | Quote (with section) | Issue for our client | Severity (High / Medium / Low) | Suggested redline. Then list: provisions missing that our client should request, inconsistencies between the license and its schedules, and questions for the client. Quote the agreement for every issue. Where an issue depends on [JURISDICTION] law or on IP-specific rules (for example, enforceability of royalties after patent expiration), flag it as a research question rather than stating a rule. This review is a draft for attorney review, and any legal authority must be verified.
Example Output
A quoted issue table covering grant scope through termination with severity ratings and suggested redlines, followed by missing provisions, schedule inconsistencies and client questions.
Illustrative example — names, figures, and facts are fictional.
IP LICENSE REVIEW (DRAFT) Agreement: Patent and Know-How License, Corvane Materials Inc. (Licensor) to Bellweather Coatings LLC (Licensee) (fictional) We represent: Licensee | Purpose: manufacture and sell anti-corrosion coatings for marine and industrial uses in North America # | Area | Quote | Issue | Severity | Suggested redline 1 | Grant / field | Sec. 2.1: "...solely in the Field of marine vessel hull coatings." | Excludes industrial uses the client plans to sell into. | High | "...in the Field of protective coatings for marine and industrial applications." 2 | Territory | Sec. 2.1: "in the United States" | Client plans Canada and Mexico. | High | Expand to "the United States, Canada and Mexico." 3 | Improvements | Sec. 6.2: "All Improvements made by Licensee shall be owned by Licensor." | Assigns licensee's own improvements to licensor. | High | Licensee owns its improvements; grant-back of a non-exclusive license to licensor in the Field. 4 | Royalties | Sec. 4.1: 5% of "Gross Sales" | No deductions for returns, freight or taxes. | Medium | Royalty base of "Net Sales," with defined deductions. 5 | Audit | Sec. 4.6: audit "at any time" | Unlimited frequency and no cost allocation. | Low | Once per year, on 30 days' notice; licensor pays unless underpayment exceeds 5%. 6 | Termination effects | Sec. 12.4: "all rights cease immediately" | No sell-off period for inventory. | Medium | Add 6-month sell-off period. 7 | IP warranty | Not found | No warranty that licensor owns the patents or that they are in force. | High | Add ownership, validity-not-challenged and no-conflicting-grant warranties. MISSING PROVISIONS - Licensee step-in rights if Licensor fails to maintain patents (Sec. 7 covers prosecution only). INCONSISTENCIES - Schedule A lists 4 patents; Sec. 1.8 defines Licensed Patents as "the patents listed on Schedule A and Schedule B." Schedule B not provided. RESEARCH QUESTIONS - Royalties run "for the term of this Agreement" (Sec. 4.1) with no step-down when patents expire. Enforceability of post-expiration patent royalties under [JURISDICTION] and federal law: research and verify. CLIENT QUESTIONS - Are sales into Canada and Mexico expected in year one? Draft for attorney review.
Tips
- •Describe the planned products and territory in detail. Grant scope problems only show up when the grant is compared to what the client actually plans to do.
- •Paste the schedule of licensed patents or marks. Many issues come from a schedule that does not match the grant language.
- •For trademark licenses, ask Claude to give extra attention to quality-control provisions and their practical workability.
- •Run clause-negotiation-memo-with-fallbacks afterward if you need fallback positions for each issue.
- •Research every flagged question, such as post-expiration royalties, in authoritative sources. The output is a draft for attorney review.
Frequently Asked Questions
Does this work for software and SaaS licenses?
Yes, though software-specific terms deserve extra detail. In the context block, describe whether the software is installed, hosted or embedded in the client's product, and mention any open-source components. Ask Claude to add areas such as source code access, escrow, support and updates. For pure SaaS subscriptions, a general contract review prompt may fit better.
Can Claude check whether the licensed patents are valid or in force?
No. Claude can only review the agreement text. It cannot confirm ownership, validity, maintenance fee status or expiration dates. Check the licensed patents or registrations in official records, and confirm the chain of title. If the agreement lacks warranties on these points, the review should flag that as a missing provision, which the prompt asks Claude to do.
How does representing the licensor change the review?
Set the represented party to licensor and describe what the client must protect, such as core markets, quality standards and the value of improvements. Claude will then look for grants that are too broad, weak audit and reporting rights, inadequate quality control for trademarks, and termination provisions that leave the licensee using the IP. The issue table and redlines will be written from that side.
What should I do with the research questions Claude flags?
Treat them as assignments. Questions like post-expiration patent royalties, the effect of bankruptcy on a license, or the assignability of a license depend on federal and state law and on the IP type. Research them in authoritative sources and verify any authority you rely on. Claude can help draft the analysis once you paste the sources you found.
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