Second Circuit Decision Extends Non-Compete Law to IP Licensing Agreements

Licensing is a critical component in the economic exploitation of intellectual property —  allowing the IP owner to leverage a licensee’s resources to exploit the IP for mutual benefit. Intellectual property licenses often contain terms that restrict the licensee’s use of the protected technology or design outside the terms of the license.  These terms are usually not thought to present any special legal problems.

But a recent Second Circuit decision should change that thinking.  Crye Precision LLC v. Duro Textiles, 689 Fed.Appx. 104 (2d Cir. 2017), extends the common-law restrictions on non-compete provisions to a new area:  intellectual property licenses.  Crye appears to break new ground in applying this law to restrictions in an intellectual property license.  Counsel who draft licensing agreements need to consider whether restrictions often found in such agreements would be enforceable under the non-compete principles.