AI for IP and licensing lawyers: license agreement review in Word

License agreements are dense with defined terms ("Licensed Patents", "Field", "Territory", "Net Sales") and small drafting choices that move a lot of value. IP and technology transactions lawyers spend hours checking that the grant, the money and the exit all line up. AI in Word can take the first pass and catch the mechanical errors, so your time goes on the judgment calls.

Where AI helps in an IP and licensing practice

• Defined-term and cross-reference checks. Rule-based and almost instant. They find terms used without a definition, terms defined but never used, and references to schedules that do not exist. In a license, these errors change the scope of the grant.
• First-pass risk review graded Critical, High, Medium or Low, with missing standard terms flagged.
• Word-level redlines as native tracked changes.
• Plain-English explanations for business clients.

LexDraft has no dedicated license playbook yet. Run a general review with the governing state selected, and use the checklist below.

License agreement: what to check

• Grant. Exclusive, sole or non-exclusive; field of use; territory; term; and whether the grant covers improvements.
• Sublicensing and assignment. Under federal law, a non-exclusive patent license is generally personal and cannot be assigned without the licensor's consent (In re CFLC, 9th Cir. 1996), and courts take the same view of non-exclusive copyright licenses. Say what happens on a change of control.
• Money. Royalty base and the definition of Net Sales, minimums, milestones, audit rights and late-payment interest. Royalties for use of a patent after it expires are unenforceable (Brulotte v. Thys, reaffirmed in Kimble v. Marvel, 2015), so step royalties down or split patent and know-how payments.
• Ownership of improvements and any grant-back.
• Challenges. A licensee can challenge the licensed patent (Lear v. Adkins, 1969) and can do so without first breaching (MedImmune v. Genentech, 2007). Licensors often add termination or royalty-increase rights if the licensee challenges.
• Warranties, indemnities and enforcement. Who sues infringers, who controls the case and who keeps the damages.
• Termination and its effect. Sell-off periods, survival of sublicenses and return of materials.

Writing and recording rules

• Copyright. A transfer of copyright ownership, including an exclusive license, needs a signed writing (17 U.S.C. 204(a)).
• Patents. Assignments must be in writing, and recording with the USPTO within three months protects against later purchasers (35 U.S.C. 261).
• Trademarks. A trademark licensor must control the quality of the licensee's goods or services, or risk a "naked license" and loss of rights. Put real quality-control terms in the license.

Bankruptcy

Section 365(n) of the Bankruptcy Code lets a licensee keep using licensed "intellectual property" if a bankrupt licensor rejects the license. The Code's definition does not include trademarks, but the Supreme Court held in Mission Product Holdings v. Tempnology (2019) that rejection does not end a trademark licensee's rights either. Draft royalty, exclusivity and source-code escrow terms with this in mind.

A workflow in Word with LexDraft

1. Open the license in Word and open LexDraft.
2. Run the defined-term and cross-reference checks first; fix the scope errors they surface.
3. Select the governing state and run the review. Work through Critical and High findings.
4. Accept the redlines you agree with as tracked changes and add your own.
5. Read the grant, payment and termination sections together one last time.

What LexDraft does not do

LexDraft does not search patents or trademarks, value IP, or give legal advice. AI review can miss issues or be wrong; qualified counsel must review every output.

Using AI ethically in this practice

ABA Formal Opinion 512 (July 2024) and many state bars say the same four things: understand the tool, protect client confidences, check every output, and bill fairly for AI-assisted work. Our state-by-state guide to AI ethics for solo lawyers summarises the guidance in 20 states and D.C.

Plans

Start on the Free plan: 5,000 generated words a month, no time limit and no credit card. Professional is $99 a month or $990 a year for 100,000 words a month. Business is $199 a month or $1,990 a year with unlimited words. LexDraft runs in Word 365 (Windows and Mac), Word 2021 and Word on the web, and it does not use customer documents to train models.

This guide is general information, not legal advice. LexDraft does not give legal advice; qualified counsel must review every draft. Spotted something out of date? Email support@lexdraft.ai and we will fix it.