License agreement under contract law in the Netherlands
What is a license agreement under Dutch law?
Under Dutch law, a license contract (licentieovereenkomst) grants a party (the licensee) the right to use the licensor's property, typically intellectual property such as a patent or trademark. There is no specific Dutch legislation solely dedicated to licensing, but general contract law and IP laws apply.
Dutch law incorporates the provisions of general contract law, primarily codified in the Dutch Civil Code (Burgerlijk Wetboek), to govern license agreements.
License agreements under Dutch law often intersect with other legal domains, such as intellectual property law and competition law, including EU competition law. This intersection adds additional considerations that must be taken into account when drafting and negotiating license agreements.
Subject of a license agreement under Dutch law
The subject matter of a license agreement can cover various assets or rights. Typically, it involves the granting of rights to use, execute, reproduce, publish, modify, display, perform, transmit, distribute internally or externally, sell, or prepare:
- Intellectual property, this can include patents, plant breeders' rights, copyrights, or trademark rights.
- Know-how, proprietary knowledge, expertise, or confidential information that is not publicly available.
- Software, license agreements may cover the use and distribution of software, including proprietary or open-source solutions.
- Domain names, license agreements can govern the use and management of domain names, enabling licensees to use specific domains.
Different forms of license agreements under Dutch law
Under Dutch law, license agreements can take various forms, providing flexibility and options to both licensors and licensees. Here are some common forms of license agreements:
- Exclusive, sole, or non-exclusive, an exclusive license grants the licensee all usage rights regarding the subject matter, while a sole license grants exclusivity to some extent, prohibiting the licensor from granting licences to other parties. In contrast, a non-exclusive license allows the licensor to grant rights to multiple licensees simultaneously.
- Fixed-period or perpetual, license agreements can have a fixed duration, meaning they are valid for a specific period, or they can be perpetual, continuing indefinitely until terminated. It is common for agreements to include notice periods, providing both parties with the ability to terminate the agreement with prior notification.
- Existing or pending patents, license agreements may relate to existing patents, where the licensee gains rights to use patented technology, or they can be tied to pending patents, allowing licensees to gain rights once the patent is granted. It is important to define the scope and conditions for pending patents in the license agreement to avoid potential disputes.
License obligations and principles under Dutch law
When entering into a license agreement under Dutch law, certain obligations and principles apply, emphasising reasonableness and good faith (redelijkheid en billijkheid). The Dutch legal system places a strong emphasis on these principles, which apply to all contractual arrangements. Courts in the Netherlands have the power to set aside or invalidate contractual provisions that contradict the principle of reasonableness and good faith.
This requirement underscores the importance of negotiating and drafting license agreements with fairness and transparency in mind. Parties should make sure that the terms and conditions of the agreement align with these principles to maintain the validity and enforceability of the contract.
How does Dutch law differ from English law on good faith in license negotiations?
Dutch law subjects all contractual negotiations to the standard of reasonableness and good faith under Article 6:2 of the Dutch Civil Code, whereas English law recognises no general duty of good faith, even between sophisticated commercial parties.
This distinction matters directly for international license agreements. When parties choose Dutch law to govern their contract, they accept that pre-contractual conduct can give rise to liability. A party that breaks off negotiations at an advanced stage may face a claim for damages if doing so conflicts with the demands of good faith.
English law takes the opposite position. As the former House of Lords made clear in Walford v Miles, each negotiating party may freely pursue its own interests, threaten to withdraw, or actually withdraw, without incurring liability, provided it avoids misrepresentation. Leading Dutch legal doctrine notes that a general duty to negotiate in good faith is regarded under English law as inherently inconsistent with the adversarial nature of commercial bargaining.
For licensors and licensees operating across both systems, this gap has practical weight. A licensor based in the Netherlands negotiating a cross-border license agreement should be aware that Dutch courts will apply good-faith standards to the negotiation process itself, not only to the executed contract. Consulting a Dutch lawyer before entering negotiations is advisable when the applicable law is in dispute.
Why do international parties choose English law for commercial contracts, and what does this mean in the Netherlands?
English law is the most widely chosen governing law for international commercial contracts, selected in approximately 40% of cases globally, because commercial parties associate it with legal certainty, contractual freedom, and the absence of overriding good-faith requirements.
Research among international businesses confirms that the perceived neutrality of the legal system, its suitability for the contract type at hand, and familiarity with its rules are the primary reasons for choosing a governing law. English law scores consistently high on all three factors. Swiss law and New York law follow at a considerable distance.
The attraction of English contract law for commercial parties rests partly on what it does not contain. There is no general duty of good faith, no implied obligation to deal fairly during performance, and courts apply a strong presumption that written terms mean what they say. This predictability appeals to parties who want their agreements enforced as written, without judicial interference on grounds of fairness or equity.
However, Dutch law governs many international license agreements, particularly where one party is Dutch or where the licensed rights are registered in the Netherlands. In those situations, parties should not assume that an English-law drafting style automatically produces English-law outcomes. Dutch courts apply Dutch law according to Dutch legal methodology, including the good-faith standard.
How do Dutch courts interpret the language of a license agreement?
Dutch courts interpret written contracts by asking what meaning the parties could reasonably have attributed to the contractual language, taking account of all surrounding circumstances. This approach differs from the more text-focused default under English law.
Under English law, interpretation centres on the meaning that a reasonable person with the relevant background knowledge would give to the document. Lord Hoffmann's influential analysis in Investors Compensation Scheme Ltd v West Bromwich Building Society established that the background may include almost anything that would have affected how a reasonable person understood the contract language, with one significant exception: prior negotiations and declarations of subjective intent remain inadmissible.
Dutch courts do not draw the same sharp line. The Dutch interpretive method, derived from the Haviltex standard, allows a court to weigh the parties' pre-contractual communications, their conduct during negotiations, and their reasonable mutual expectations. Textual meaning carries significant weight, particularly between professional parties operating at arm's length, but it is never the sole criterion.
Leading Dutch legal doctrine observes that interpretation and gap-filling are closely linked: the broader a court reads contractual language, the fewer gaps arise that require supplementation. For license agreements, this means that ambiguities in the scope of the grant, the territory, or the permitted uses are resolved not simply by dictionary definition but by reference to what the parties reasonably understood at the time of contracting.
What is the Netherlands Commercial Court, and can license disputes be litigated in English?
The Netherlands Commercial Court (NCC) and the Netherlands Commercial Court of Appeal (NCCA) are specialist chambers of the Dutch court system, operational since 1 January 2019, that hear international commercial disputes entirely in English under Dutch procedural law.
The NCC was created specifically to attract cross-border commercial litigation to the Netherlands. Parties with an international license dispute governed by Dutch law can agree in writing to submit their case to the NCC and conduct the entire proceedings, including written submissions, oral hearings, and judgments, in English. This removes the language barrier that has historically discouraged foreign parties from litigating in Dutch courts.
Judges assigned to the NCC are selected on the basis of their proficiency in English and their experience with commercial matters. The procedure follows Dutch civil procedural law but incorporates modern case management elements designed for complex international disputes. Court fees at the NCC are approximately four times higher than in ordinary Dutch proceedings, which reflects the specialist nature of the forum.
Hearings at the NCC are public as a rule. However, parties may apply for a closed hearing where commercially sensitive information, such as confidential know-how or trade secrets, would otherwise be disclosed in open court. This exception is directly relevant for license disputes involving proprietary technology or undisclosed business information.
For international parties negotiating a Dutch-law license agreement, inserting an NCC jurisdiction clause removes a significant practical obstacle. It allows both parties to litigate in their working language while still benefiting from the legal certainty of the Dutch court system. Whether the NCC or arbitration is preferable depends on the specific circumstances of the agreement, and consulting a Dutch lawyer on that choice is advisable.
Formal requirements of license agreements under Dutch law
Dutch law does not impose specific formal requirements for license agreements. This means that these agreements can be concluded orally or through an exchange of documents. However, certain licences for intellectual property rights may only be invoked against third parties when properly registered. It is therefore advisable to consult a Dutch lawyer before entering into a license agreement governed by Dutch law to make sure the relevant formalities are met.
Seven key considerations for license agreements under Dutch law
When preparing to enter into a license agreement governed by Dutch law, it is important to consider various factors to protect your interests and maintain a successful partnership. Here are some key considerations:
1. The scope of the license agreement under Dutch law
When entering into a licensing agreement, it is important to consider the temporal and territorial scope of the licensing arrangement. A licensing agreement may be for a fixed period or may be perpetual. In either case it may be advisable to include a notice period. The territorial scope of the licencing agreement should also be clearly and unambiguously defined in the agreement.
2. Invalidity or expiration of the licence under Dutch law
Clearly define the scope of the license agreement, both temporally and territorially. Specify whether the agreement is for a fixed period or perpetual and include any relevant notice periods. Additionally, unambiguously outline the territorial scope to avoid potential disputes or confusion.
3. Assignment and sub-licensing under Dutch law
Decide whether to limit or prohibit the licensee's ability to assign or sub-license the rights granted under the agreement. Such clauses provide certainty regarding the ownership and distribution of intellectual property or other rights.
4. Confidentiality, know-how and goodwill
Consider including provisions that protect against the disclosure of confidential information, know-how, or goodwill. Breaches of these obligations can potentially give rise to claims under Dutch tort law and/or Dutch competition law.
5. New developments during the currency of the licence under Dutch law
Specify whether new developments related to the licensed intellectual property will be covered by the license agreement. In certain cases, the licensee may further develop the intellectual property, and the licensor may wish to benefit from those developments. In such instances, a non-exclusive licence allowing the licensor to benefit from new developments could be considered.
6. Termination of a license agreement under Dutch law
Given the often long-term nature of license agreements, including provisions for termination under specific conditions can be prudent. For example, it may be advisable to include termination clauses in the event of licensee insolvency or the expiration or invalidation of an intellectual property right.
7. Dispute resolution under Dutch law, arbitration or jurisdiction of the Dutch courts
Consider including clauses for dispute resolution, such as arbitration or alternative methods, within the license agreement. Depending on the circumstances, arbitration or litigation in Dutch courts may be the preferred approach. For international license agreements governed by Dutch law, the Netherlands Commercial Court offers a significant practical advantage: parties can agree to litigate in English before experienced commercial judges, without surrendering the protections of the Dutch legal system. Consulting with a lawyer can provide insights into the advantages and disadvantages of different methods for resolving disputes.