Whether it is requested for advertising, business partnering, or distribution, a data license is often at the center of today’s business arrangements. A data license involves granting another entity or person (licensee) permission to use the data of the granting party (licensor) subject to certain restrictions.
“Restrictions” can include several factors, such as the length of time during which and the purposes for which the licensee may use the data. To be licensed effectively to another party, “data” must qualify for some form of intellectual property or proprietary rights protection, such as a copyright or trade secret asset, to enable the licensor to claim exclusive or controlling rights to the data.
Before entering into a data licensing agreement, an organization should consider three primary issues:
- The rationale for entering into a data licensing agreement
- The complexity or mechanics of the licensing agreement
- Compliance obligations, and conditions under which a company may license in or out a certain type of data
Why Enter Into a Data Licensing Agreement?
A licensor and licensee will have different priorities when deciding if a data license makes sense for its business. For example, a licensor may be drawn to opportunities for profit, brand visibility, relationship-building, and control over the data. A licensee, on the other hand, may be interested in easy access to data, targeted advertising uses, enhancement of in-house datasets, and potential reduction of privacy law compliance risks as the recipient of the data (if licensee is a “processor” and not a “controller”).
Drafting Complex Data Licensing Agreements: Key Questions
Drafting a license agreement will require answering several questions:
- Who is the actual owner/licensor and user/recipient/licensee?
- Who are the “authorized users”?
- Who may access the licensed data?
- What form of data is being licensed?
- How long will the license be in place?
- Where may the data be delivered, stored, or distributed?
- Why are the parties entering into the license agreement at all?
Parties should also pinpoint how the licensed data can or cannot be used—such as for training of artificial intelligence tools or similar uses.
Data Licensing Compliance and Privacy Law Considerations
Several states have enacted (or will be enacting) new legal requirements for businesses that share or transfer the data of the residents of that state. Data providers must acknowledge consumers’ rights concerning access to their data, correction of their data, and rights to notice and/or opting out of certain uses of their data.
Data controllers are held to certain standards with regard to maintaining certain data security practices to protect the collected personal data and must observe additional limits when transferring specific types of personal data (e.g., data of minors or data from financial institutions).
Parties should stay abreast of applicable data protection laws and determine what laws apply to the license agreement. The agreement should also anticipate a potential change in the law that may upend the entire arrangement and can collaborate with counsel to draft this language and ensure compliance with evolving privacy statutes.
