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What happens to sub-licenses when master licenses are terminated?

New York, NY |

Company A operates in the USA (Wichita, Kansas) and sells a master license to John for all of Canada with rights to sub-license smaller territories to others. Paul purchases a sub-license from John for a specific territory.

Company A decides to cancel master license to John.

What happens to Paul's sub-license since it was signed under John but with the rights to do so and approved by Company A?

Is Paul's sub-license null and void or does Company A assume the sub-license contract? Can company A void the contract but still enforce certain clauses which are to Company A's benefits?

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Attorney answers 1


Are you a law student with a question you need to answer for class? This is causing flashbacks to contracts and copyright classes.
This is a very fact specific issue and would need to be looked at by an attorney. It likely depends upon the terms of the specific master license and sub-license. In general, if the licensee in a master license has the right to sub-license his/her rights the sub-license would terminate upon termination of the master license. There may be provisions providing for either automatic termination or survival of the sub-license in the event the master license is terminated. If the sub-license survives termination, the original licensor would likely step into the shoes of the sub-licensor.
They may also be some issues with the sub-licensee being a known and acknowledged third-party beneficiary of the master license and having some argument to maintain the sub-license. Again, there are likely terms in the master license and/or sub-license agreements that address this situation.

Disclaimer: This answer does not constitute legal advice and does not create an attorney-client relationship. You should not rely on this answer to resolve your particular legal issue, since different laws are applicable in each jurisdiction, and each set of facts are specific to a particular situation. As with any legal question, you should consult with an attorney licensed in the appropriate jurisdiction to evaluate your particular legal problem following a comprehensive consultation and review of all the facts and documents.