Guest Blog: Licensing Intellectual Property Rights Out of this World

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The harsh environment of outer space turns even the most routine tasks into significant engineering challenges. I was recently surprised to realize that outer space operations can also turn even the most routine contractual language into a legal conundrum.

As an in-house attorney for a research laboratory that specializes in guidance, navigation and control technologies, I was reviewing a typical license agreement for software that would be used on a small satellite. The agreement stated that we would have a “worldwide” license to use the software for our intended purpose. At first, I read the word “worldwide” without concern, as this term is commonly used in license agreements to convey that there are no geographic restrictions on the recipient’s use of the licensed technology. Yet, on second thought, I wondered whether a worldwide license actually gives us sufficient rights to use the software in a satellite that is arguably out of this world (i.e. orbiting Earth). What, exactly, is the geographic scope of a worldwide license? Could a licensor take advantage of this ambiguity to extract additional payments from an unsuspecting licensee?

While I am not aware of any cases where a court has been required to interpret the geographic scope of a worldwide license, I am not the first lawyer to think about this issue. An Oct. 29, 2009, Wall Street Journal article titled “Lawyerese Goes Galactic as Contracts Try to Master the Universe” described contracts for reality television contestants that granted the production studios rights “in all media, throughout the universe, in perpetuity.” The article explained that “more and more people are encountering such everywhere-and-forever language as entertainment companies tap into amateur talent and try to anticipate every possible future stream of revenue.” Justifying this trend, a law professor is quoted as arguing that such language could be “a stroke of brilliant foresight” because “referring to geographical limits loosely can be dangerous.” For instance, he postulates that the term “throughout the world” might exclude possible future markets and people might one day inquire “Why didn’t they get the Mars rights?”

Outside of Hollywood, most licensing attorneys would probably not spend much time thinking about the geographic scope of worldwide intellectual property licenses. However, my own experience suggests that for those of us in the space industry, it is worth spending a few moments considering how a court might interpret this term in the outer space context.

Imagine the case of a satellite operator who installs an off-the-shelf software product on its satellite. The click-through license agreement included with the software gives the user a worldwide license to install and use the program for general commercial purposes. As would most of us, the engineer installing the software “accepts” the terms of the click-through license agreement without reading it closely. After the satellite is placed into Earth orbit, the company that produced the software sues the satellite operator for violating the geographic scope of the license agreement and demands additional payments to cover the use of the software in outer space. The liability of the satellite operator would depend on how the court interprets the scope of the worldwide software license.

Without legal precedent or a record of negotiations between the parties as a guide, the court would look to the common dictionary definition of the term “worldwide.” Merriam-Webster’s Online Dictionary defines “worldwide” as “extended throughout or involving the entire world.” Definitions in other dictionaries are mostly similar to Webster’s definition (e.g., “spanning or extending through the entire world” and “involving the entire earth”), but also include “not limited or provincial in scope” and “universal.”

The less common definitions “not limited or provincial in scope” and “universal” conform to the common understanding of the term “worldwide” as used in license agreements. If the court adopted one of these definitions, the satellite operator would likely be successful in defending its use of the software in Earth orbit. However, the software company would surely urge the court to adopt one of the more common and restrictive definitions.

If the court adopted a restrictive definition of “worldwide,” such as Webster’s “extended through or involving the entire world,” the court would next need to determine what encompasses the “world.” Black’s Law Dictionary defines “world” in the geographical sense as “the planet Earth.” Webster’s has 14 definitions for “world,” with the relevant definitions for our purpose being: “the Earth with its inhabitants and all things upon it” and “a celestial body (as a planet).”

Technically there is no clear boundary between the Earth’s atmosphere and outer space. Nevertheless, the Kármán line, located at an altitude of about 100 kilometers, is a commonly used reference point. The Kármán line might therefore be a reasonable delineation for leaving the “world” for the purposes of interpreting intellectual property licenses. In fact, using the atmospheric boundary to differentiate legal rights has precedent in international law. Spacecraft in Earth orbit are generally permitted to overfly a country’s airspace without permission, whereas an aircraft flying within the atmosphere may not do so. In addition, the 1972 U.N. Convention on International Liability for Damage Caused by Space Objects applies a fault-based standard for damage caused to objects in outer space and a strict liability standard for damage caused to objects on the Earth’s surface or to aircraft in the atmosphere.

Of course, adopting an atmospheric standard such as the Kármán line would result in an unfavorable outcome for the satellite operator. To counter this, the satellite operator could argue that using an atmospheric standard is not the only option for determining when something has left the “world,” even under a restrictive definition of “worldwide.” A satellite in Earth orbit, even if above the atmosphere, still “involves” the entire world since it remains captured by Earth’s gravity. Under this broad interpretation of Webster’s definition of “worldwide” (“involving the entire world”), a spacecraft would travel beyond the scope of a worldwide license only once it has left the pull of Earth’s gravity; thus, a satellite in Earth orbit would still be in compliance with a worldwide license agreement.

Until a court is presented with a case on this topic, we can only speculate how it would interpret the scope of a worldwide intellectual property license. Nevertheless, just as space engineers cannot take for granted any task or process that is routine on Earth, space industry attorneys cannot assume that common terrestrial legal practices, such as licensing terms, will be suitable for outer space operations. Here, a license term with an undisputed definition on Earth was shown to have a number of possible definitions in the outer space context, an ambiguity with potentially significant business ramifications.

 

Matthew Kleiman is an attorney for the Charles Stark Draper Laboratory in Cambridge, Mass. and a lifelong space enthusiast. Prior to joining Draper, he was a senior associate at the law firm WilmerHale, where he represented early stage technology and life science companies on venture capital financings, intellectual property licensing and other technology-related transactions. He looks forward to the day when he can negotiate license agreements from his office on Mars.