( Young and Mary are trainees at ABC Law Firm. Mary is from the U.S.A and Young is Chinese. The big boss of the law firm is Mr. Jeff Honest. )

 

Young: Mary!

Mary: I’m here. What’s up?

 

Young: Did you ever draft any contract for know-how licensing?

Mary: No, not so far. Why?

 

Young: Jeff asked me to a draft a contract for know-how licensing between a U.S. based corporation and a Chinese company, but he refused to give me any model contract to refer to. He wants you assist me in doing it.

Mary: I’ll try.

 

Young: Huh! Who can we turn to this time?

Mary: We can always count on ourselves. If we work hard enough, miracle might work itself.

 

Young: I definitely hope so. To drag myself into deliberation seems to be the only way out, and it is. And Mary, you will be there for me, won’t you?

Mary: Yes, I’m always here for you.

 

Young: Thanks. Let’s get started. Definitions are put before everything else, aren’t they?

Mary: I suppose not. Headline and preface should go first.

 

Young: OK. Headline: Contract for Know-how Licensing. Preface: This contract is made by and between______, a U.S. based corporation ( hereinafter referred to as licensor ) and______, a company organized and existing under the law of the P.R.C (hereinafter referred to as licensee ). Licensor agrees to grant licensee an exclusive and nontransferable license to exploit know-how in connection with the contracted products, and agrees licensee to design, manufacture, use and sell contracted product within the territory of China. Therefore, licensor and licensee agree on the following terms and conditions. All right, that’s preface. Then should it be chapter one: Definition?

Mary: I think so. But what sort of things should be defined, contracted products, know-how, technical documentation, technical service and personnel training? What else can you think of, Young?

 

Young: Royalty period if not on a lump-sum basis, and then net sales and ownership of improvement on contracted know-how.

Mary: Ownership? Who has the right to the improved technology developed from the contracted know-how? I think that should appear somewhere as a clause in the later chapters.

 

Young: You’re right. It shouldn’t be incorporated into the chapter of definitions. What’s the next chapter supposed to include?

Mary: Price and arrangements for payment? Or timetable for technical service and technical training?

 

Young: Or possibly grant of license? I think grant license is the essence of the contract and thus should go before many other things.

Mary: I agree.

 

Young: Then the first clause of the chapter two just might be concerned with the licensor ‘s major obligations to transfer the know-how and related technical documentation, to provide the licensee with technical services and to train the licensee’s personnel. Next clause specifies the time period of his performance.

Mary: Then the next one provides for the licensor’s warranties: warranties of non-infringement and warranty of standard and incentive of the know-how. Spell out that if the use of know-how or sale of products made by exploiting the know-how infringes on a third party’s industrial property, the liable will be solely liable and therefore insert an indemnity clause here.

 

Young: OK. Next clause is to deal with the licensee’s duties, I suppose. More than anything else, the licensee has to pay for the know-how.

Mary: Price is often settled in prior payment.

 

Young: You’re right. Ha, what a nice mess Jeff has pushed us in! But complaints gets us nowhere anyway. So first goes price, then payment. Should it be payment on initial fee plus royalty basis or on the lump-sum basis?

Mary: How do I know? I’m no party of this contract. Just leave it to Jeff.

 

Young: That seems to be the only thing we can do about it at the moment. Next clause might state that the licensee should make necessary or due assistance and cooperation in order for the licensor to render his performance under this contract.

 

Young: All right. That’s good. What else is the licensee obligated to do?

Mary: The licensee should keep under his hat the technological secrets of the know-how.

 

Young: I’m grateful that you didn’t say he shouldn’t let the cat out of the bag, Come on, Mary. I know how you feel, but let’s not sound like we’re chatting over lunch rather than handling legal affairs.

Mary: Sorry, Young. I know I should be more patient, but what I don’t understand is why Big Jeff doesn’t allow us access to any model contract while all layers in America refer to those boilerplates.

 

Young：Neither do I think it makes any sense. But good news is that it’s already more than halfway and that much work to do.

Mary: But we might have left out some important things, which will make our laborious work meaningless.

 

Young: Yes, we might have. But let’s move on. The next chapters may cover acceptance test, termination of the contract and...and...force majeure.

Mary: Young, you probably don’t understand. It’s not the laborious work that matters. What really bothers me is that spending two hours or so drafting this contract isn’t worthwhile. If we’re allowed to refer to model contracts, this afternoon can be more fruitful and productive.

 

( At this moment Jeff walks into their office.)

Jeff: How’s your work?

Young: It’s still in progress and Mary and I are about to go crazy.

Mary: Yeah. There’s so many things in this case we have no idea about and why don’t you let us refer to the boilerplates, which we all used back in America.

 

Jeff: So you mean you’ve had enough of this and me?

Mary: Well, I didn’t say I was fed up, but...

 

( Jeff produces a box of chocolates from behind. )

Jeff: Happy April Fool’s Day, ladies.

Mary & Young: Oh no!

Mary: ( murmuring to herself ) Wait until next April. I’ll have you pay for it.

 

 

*Words and Expressions