As data becomes an increasingly valuable asset, managing privacy and security risks poses major challenges in intellectual property (IP) licensing. Here are some of the key issues that companies and their IP attorneys should consider when navigating data risks in IP licensing deals:

• Due diligence – Vet potential licensees thoroughly, especially regarding their data handling policies and compliance. Screen for prior breaches, complaints, audits, fines, etc.
• Data scope – Clearly define the types of data covered by the license. Overly broad access rights create risks. Limit data uses to what is essential.
• Territorial issues – Account for national/regional data protection laws like GDPR when defining geographic scope. Cross-border transfers may be prohibited.
• Security – Mandate licensees implement adequate technical controls like encryption, access limitations, and monitoring to safeguard sensitive IP data.
• Breach notification – Require prompt notification of any unauthorized data access or loss. Rapid response is crucial for mitigating harms.
• Liability – Specify indemnities and liability caps to allocate financial risks from data breaches or regulatory actions.
• Audits – Allow licensors to periodically audit licensees for compliance with data privacy/security obligations.
• Training – Make data security training for personnel a license requirement to ensure proper handling.

Takeaways

The above list is just a start.  With data leaks capable of carrying severe consequences, IP attorneys and consultants play a critical role in advising clients on potential data risks in licensing transactions and crafting provisions to help mitigate them. Staying up-to-date on privacy and security best practices is key to protecting IP assets. Participating in professional associations such as AIPLA and LES, and also keeping abreast of articles such as this, will ensure that you are prepared when navigating data risks in your IP licensing deals.  Contact us if you want to discuss any specific data management concerns or want input on any other aspect of managing your or your clients’ IP portfolio.