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When is an “exclusive” license not exclusive? This is a question that arises in a surprising number of disputes involving license agreements. Too many contract drafters rely on certain terminology under the assumption that such terms have common meanings in a particular industry. But even a common contract term such as exclusive may have different meanings in competing jurisdictions.

An exclusive license has the broadest scope of any license that can be granted. An exclusive license excludes the use of the intellectual property right licensed to everyone but the licensee. After granting an exclusive license, the licensor is also (usually) excluded from continuing to use the intellectual property within the territory of exclusivity. However, this is not always the case. In some jurisdictions, use of the term exclusive license does not mean that the licensor cannot also use the IP right simultaneously. As you can imagine, this can be the source of considerable confusion.

Other than clearly defining such terms in the agreement (the preferred method), one solution from a drafting standpoint is to distinguish between exclusive licenses and sole licenses. A sole license is a type of exclusive license where the licensor remains entitled to use the licensed subject within the territory of exclusivity, i.e., unlike in a typical exclusive license, the licensor generally retains the right to use the intellectual property.

Of course, such problems of interpretation never arise in connection with non-exclusive licenses, which may be granted by the licensor to as many licensees as desired within a specified territory. Most commercial software licensed today is licensed on a non-exclusive basis.