for a limited period of time. Often this exclusivity is subject to HiTechCo having
the same right to exploit the technology as InvestCo, so that the rights of each
party might better be characterized as "semi-exclusive". Particularly in cases
where the risks are high, InvestCo will need to have an adequate incentive to
back the project. On the other hand, quite often where the financial strength of
InvestCo is great compared to that of HiTechCo, InvestCo is not too concerned
about HiTechCo retaining any license to use the technology, so long as that
license is not transferable to third parties, such as competitors of InvestCo.
In other cases, InvestCo may consider that a lead of one year or two is adequate
protection over its competitors, and that in practise, a lengthy period of exclusivity
is of no benefit as the technology may be expected to change radically even
within a period of a few years. In such circumstances, the exclusivity granted to
InvestCo might be limited appropriately.
Further, InvestCo might be willing to take a non-exclusive license, that is either
royalty-free or which carries a relatively small royalty, on the further condition that
HiTechCo will pay back InvestCo for all sums that are advanced against the cost
of the foreground technology. That is, InvestCo's reward for advancing the
required funds for developing the foreground technology is a royalty-free license,
which includes a license under any required background technology which is
necessary to successfully exploit the foreground technology.
3. Operation of the Joint Venture
It is desirable to set out in the agreement, with reasonable precision, the purpose
of the venture, listing the work that is proposed to be done. There may also be
provisions for dealing with the rights of the parties to operate independently of
each other in areas outside of the scope of the venture. In some cases, provision
may be made for permitting the parties to operate independently of each other,
even within the field of the joint venture, where, for example, the activity that is
contemplated is not directly competitive with the work of the venture and the
other party has been offered an opportunity to joint venture with the other in
respect of the specified project and has declined to do so.
In a typical joint venture, management is provided by an executive board. Usually
if only one joint venture partner puts up the money, they will insist upon financial
control. Thus, the executive board might consist for example, of five directors,
three of whom may be appointed by InvestCo and two by HiTechCo. There may
also be a smaller, executive committee, which could be made to be responsible
for the supervision of all technical aspects of the joint venture and make
recommendations to the executive board from time to time with respect to
existing and proposed work. In order to give HiTechCo a measure of control over
the technical direction of the joint venture, it may be provided that no
recommendations shall be made to the executive board by the executive
committee unless they are unanimous, and the executive board cannot change