California IP License Agreement (IP-Focused)

CALIFORNIA IP LICENSE AGREEMENT

Intellectual Property Department Template
Prepared Under California Civil Code, Labor Code, and Business and Professions Code

TABLE OF CONTENTS

1. Parties and Effective Date
2. California Regulatory Background
3. Definitions Specific to California IP Licensing
4. License Grant and California-Specific Scope Limitations
5. Financial Terms and California Revenue and Taxation Code Compliance
6. Diligence, Records, and Audit
7. IP Prosecution, Enforcement, and California Trade Secret Protections
8. Confidentiality Under CUTSA
9. Employee Inventions — Cal. Lab. Code § 2870 Framework
10. Representations and Warranties
11. Restrictions — Cal. Bus. & Prof. Code § 16600 Safe Harbor
12. Data Privacy — CCPA/CPRA Provisions
13. Indemnification
14. Limitation of Liability and California Statutory Damages
15. Term and Termination
16. Default and California Remedies
17. Dispute Resolution — California Superior Court and Federal Courts
18. General Provisions
19. Execution
20. Schedule 1 — Licensed IP Portfolio
21. Schedule 2 — Royalty and Milestone Structure
22. Schedule 3 — Cal. Lab. Code § 2870 Employee Notice

1. PARTIES AND EFFECTIVE DATE

This California IP License Agreement ("Agreement") is entered into as of [__/__/____] ("Effective Date") by and between:

Licensor: [________________________________], a [________________________________] organized under [________________________________] law, principal office at [________________________________] ("Licensor"); and

Licensee: [________________________________], a [________________________________] organized under [________________________________] law, principal office at [________________________________] ("Licensee").

2. CALIFORNIA REGULATORY BACKGROUND

This Agreement is structured to address the unique requirements of California intellectual property law. California differs from most other states in the following material respects, each addressed substantively in this Agreement:

2.1 CUTSA Preemption (Cal. Civ. Code § 3426.7). California's Uniform Trade Secrets Act provides the exclusive civil remedy for trade secret misappropriation, preempting common-law claims such as unfair competition based on trade secret misuse. Contractual remedies and claims based on other civil wrongs are preserved.

2.2 Employee Invention Protections (Cal. Lab. Code §§ 2870–2872). California limits employer ability to require assignment of employee inventions created entirely on the employee's own time without employer resources, unless the invention relates to the employer's business or results from employer-assigned work. Written notice to employees is mandatory.

2.3 Non-Compete Ban (Cal. Bus. & Prof. Code § 16600). California voids virtually all non-compete agreements. As amended by AB 1076 and SB 699 (effective January 1, 2024), this prohibition applies regardless of where or when the contract was signed if the worker resides or works in California.

2.4 UCL (Cal. Bus. & Prof. Code § 17200). California's Unfair Competition Law provides broad enforcement authority against unlawful, unfair, or fraudulent business acts, enforceable by both the Attorney General and private parties.

2.5 California Tax Treatment. IP licenses may qualify for sales tax exclusion under the Technology Transfer Agreement framework (CDTFA Reg. 1502) and custom software exemption (Cal. Rev. & Tax. Code § 6010.9).

3. DEFINITIONS SPECIFIC TO CALIFORNIA IP LICENSING

"Confidential Information" means information meeting the definition of "trade secret" under Cal. Civ. Code § 3426.1(d): information that derives independent economic value from not being generally known, and is subject to reasonable efforts to maintain its secrecy. The term also encompasses non-trade-secret proprietary information designated as confidential in writing.

"CUTSA" means the California Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq.

"Employee Invention" means an invention made by an employee of either Party, subject to the protections of Cal. Lab. Code § 2870.

"Field of Use" means [________________________________].

"Improvement" means any derivative work, enhancement, modification, or new invention arising from the Licensed IP, subject to Section 9.

"Licensed IP" means the intellectual property described in Schedule 1, encompassing:
(a) Patents and patent applications (U.S. and California-filed provisionals);
(b) Copyrights (registered and unregistered);
(c) Trademarks (USPTO and California Secretary of State under Cal. Bus. & Prof. Code § 14201);
(d) Trade secrets as defined by Cal. Civ. Code § 3426.1(d); and
(e) Know-how and proprietary technical information.

"Net Sales" means gross revenues from Licensed IP exploitation, less: (a) returns; (b) trade discounts; (c) California sales and use taxes remitted to the CDTFA; (d) duties; and (e) separately invoiced freight.

"Products" means goods or services incorporating the Licensed IP.

"Territory" means [________________________________].

4. LICENSE GRANT AND CALIFORNIA-SPECIFIC SCOPE LIMITATIONS

4.1 Grant. Subject to the terms herein, Licensor grants Licensee a [________________________________] (exclusive / non-exclusive / sole), royalty-bearing license to make, have made, use, sell, offer for sale, import, reproduce, display, perform, distribute, and otherwise exploit the Licensed IP within the Field of Use and Territory during the Term.

4.2 Sublicensing. ☐ Permitted with prior written consent ☐ Not permitted. If permitted, sublicensees must be bound by terms at least as protective as this Agreement.

4.3 Retained Rights. Licensor retains all rights not expressly granted.

4.4 Reverse Engineering. Licensee shall not reverse engineer trade secret components of the Licensed IP, except to the extent California law permits reverse engineering of lawfully acquired products notwithstanding contractual prohibition (consistent with Cal. Civ. Code § 3426.1 and the interoperability exception).

4.5 No Naked Trademark License. To the extent the Licensed IP includes trademarks, this Agreement includes quality-control provisions in Section 11.5 to avoid abandonment under Cal. Bus. & Prof. Code § 14245 and federal Lanham Act requirements.

5. FINANCIAL TERMS AND CALIFORNIA REVENUE AND TAXATION CODE COMPLIANCE

5.1 Up-Front Fee. $[________________________________], non-refundable, due within [____] days of the Effective Date.

5.2 Royalties. [____]% of Net Sales, payable quarterly within [____] days after each quarter end, with a certified statement.

5.3 Milestone Payments. Per Schedule 2.

5.4 California Sales and Use Tax.

(a) Technology Transfer Agreement (TTA). If the Licensed IP includes patents or copyrights and qualifies under CDTFA Regulation 1502, the intangible-rights component of fees is excluded from the California sales tax measure. The Parties shall separately identify TTA-qualifying amounts on each invoice.
(b) Custom Software. If the Licensed IP includes custom software under Cal. Rev. & Tax. Code § 6010.9, it is exempt from sales tax when separately stated.
(c) Prewritten Software. Prewritten (canned) software transferred on tangible media is subject to California sales tax.
(d) Use Tax. If sales tax was not collected, Licensee shall self-assess California use tax.

5.5 Nonresident Withholding. If Licensor is not a California resident, Licensee may be required to withhold and remit California income tax on royalties at the rate specified by Cal. Rev. & Tax. Code § 18662. Licensor shall complete any required withholding exemption forms.

5.6 Late Payments. Interest at the lesser of [____]% per month or the maximum rate under Cal. Const. art. XV, § 1.

6. DILIGENCE, RECORDS, AND AUDIT

6.1 Diligence. Licensee shall use commercially reasonable efforts to develop, market, and sell Products in the Territory.

6.2 Records. Licensee shall maintain records for at least four (4) years consistent with Cal. Code Civ. Proc. § 337.

6.3 Audit. Licensor may audit no more than twice per year, upon ten (10) business days' notice, by a California-licensed CPA. Underpayment exceeding 5% triggers Licensee's obligation to pay audit costs.

7. IP PROSECUTION, ENFORCEMENT, AND CALIFORNIA TRADE SECRET PROTECTIONS

7.1 Patent Prosecution. Licensor controls patent prosecution and maintenance at its expense.

7.2 California State Trademark Maintenance. Licensor shall maintain all California Secretary of State trademark registrations in good standing, including five-year renewals under Cal. Bus. & Prof. Code § 14212.

7.3 Infringement Enforcement. Each Party shall notify the other of suspected infringement. [________________________________] (Licensor / Licensee) has the first right to enforce. The non-controlling Party shall cooperate and join if needed for standing.

7.4 Trade Secret Enforcement Under CUTSA. For misappropriation of trade secret components of the Licensed IP:

(a) Injunctive Relief — Cal. Civ. Code § 3426.2 authorizes injunctions to prevent actual or threatened misappropriation, including in exceptional circumstances a reasonable-royalty injunction;
(b) Damages — Cal. Civ. Code § 3426.3 provides for actual loss and unjust enrichment (not duplicative), or a reasonable royalty in lieu;
(c) Exemplary Damages — Up to two (2) times actual damages for willful and malicious misappropriation (Cal. Civ. Code § 3426.3(c));
(d) Attorneys' Fees — Awardable where a claim or motion is made in bad faith or misappropriation is willful (Cal. Civ. Code § 3426.4); and
(e) Statute of Limitations — Three (3) years from discovery (Cal. Civ. Code § 3426.6).

7.5 CUTSA Preemption. Cal. Civ. Code § 3426.7 preempts all other civil remedies for trade secret misappropriation, except: (a) contractual remedies, including those in this Agreement; and (b) claims based upon other civil wrongs (e.g., breach of fiduciary duty independent of trade secret claims).

7.6 IP Marking. Licensee shall mark Products with appropriate patent, copyright, and trademark notices per applicable law.

8. CONFIDENTIALITY UNDER CUTSA

8.1 Obligations. Each Party shall: (a) maintain Confidential Information in strict confidence; (b) use it solely under this Agreement; (c) limit disclosure to need-to-know personnel bound by written confidentiality obligations; and (d) implement reasonable security measures.

8.2 Exclusions. Standard exclusions: publicly available (without breach), previously known, independently developed, rightfully received from a third party.

8.3 Compelled Disclosure. Permitted under California court order, provided prompt notice and cooperation to seek a protective order.

8.4 Remedies. Trade secret misappropriation remedies are exclusively governed by CUTSA (Section 7.4). Contractual breach of non-trade-secret confidentiality obligations is governed by the remedies in Section 16.

9. EMPLOYEE INVENTIONS — CAL. LAB. CODE § 2870 FRAMEWORK

9.1 Importance Under California Law. California Labor Code § 2870 is a mandatory statutory protection that cannot be waived by contract. It limits employer claims to employee inventions and ensures that employees retain rights to inventions created entirely on their own time and without employer resources (unless related to employer business).

9.2 Invention Ownership. Improvements and new inventions arising from this Agreement shall be owned by [________________________________] (Licensor / Licensee / jointly, as described below):

[________________________________]

9.3 Section 2870 Compliance Requirements. The following requirements apply whenever either Party's employees create Improvements:

(a) Scope Limitation. An invention-assignment provision shall not apply to any invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information, unless the invention: (i) relates at the time of conception or reduction to practice to the employer's business or actual or demonstrably anticipated research or development; or (ii) results from any work performed by the employee for the employer. Cal. Lab. Code § 2870(a).

(b) Mandatory Written Notice. Per Cal. Lab. Code § 2872, any employer requiring an invention-assignment agreement from employees shall provide the employee a written notification that the agreement does not apply to inventions qualifying under § 2870. The form of this notice is attached as Schedule 3.

(c) Prohibited Conditions. No employer shall require a provision rendered unenforceable by § 2870 as a condition of employment or continued employment. Cal. Lab. Code § 2870(a).

(d) Burden of Proof. In any dispute regarding ownership of an Employee Invention, the employer bears the burden of demonstrating that the invention falls outside the § 2870 safe harbor.

9.4 License-Back. If Improvements vest in Licensee, Licensee grants Licensor a [________________________________] (exclusive / non-exclusive) license to use such Improvements [________________________________].

10. REPRESENTATIONS AND WARRANTIES

10.1 Mutual. Each Party represents it is duly organized, in good standing, qualified to transact business in California (if applicable), and has authority to execute this Agreement.

10.2 Licensor. Licensor represents: (a) it owns or has sufficient rights in the Licensed IP; (b) to its knowledge, the Licensed IP does not infringe third-party rights in the Territory; (c) no inconsistent licenses exist; and (d) California state trademark registrations are in good standing.

10.3 Licensee. Licensee represents: (a) it has the resources and expertise to exercise the License; and (b) it will comply with all applicable California and federal laws.

10.4 Disclaimer. EXCEPT AS EXPRESSLY STATED, NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS, TITLE, OR NON-INFRINGEMENT.

10.5 Survival. Four (4) years after termination per Cal. Code Civ. Proc. § 337.

11. RESTRICTIONS — CAL. BUS. & PROF. CODE § 16600 SAFE HARBOR

11.1 Section 16600 Acknowledgment. The Parties expressly acknowledge:

(a) Cal. Bus. & Prof. Code § 16600: "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."
(b) Cal. Bus. & Prof. Code § 16600.1 (effective January 1, 2024): Employers are prohibited from entering into or attempting to enforce non-compete agreements with current or former employees.
(c) Cal. Bus. & Prof. Code § 16600.5 (effective January 1, 2024): Non-compete agreements are unenforceable regardless of where or when the contract was signed.

11.2 No Non-Compete. Nothing in this Agreement constitutes a non-compete covenant. Post-termination obligations are limited to: (a) cessation of Licensed IP use; (b) return of Confidential Information; (c) payment of accrued amounts; and (d) survival of indemnification and limitation provisions.

11.3 Permitted Exceptions. The statutory exceptions under Cal. Bus. & Prof. Code §§ 16601 (sale of business goodwill), 16602 (partnership dissolution), and 16602.5 (LLC dissolution) are available only if their specific conditions are independently satisfied.

11.4 Field-of-Use Restrictions. Field-of-use and territorial restrictions in Section 4 are intellectual property scope limitations, not restraints of trade, and are enforceable under California law as restrictions on the scope of the license grant.

11.5 Trademark Quality Control. Where the Licensed IP includes trademarks:

(a) Licensee shall comply with Licensor's written quality standards;
(b) Licensor may inspect Products on reasonable notice;
(c) Licensee shall use appropriate ®, ™, or ℠ designations; and
(d) Quality control is required to prevent "naked licensing" and potential abandonment under Cal. Bus. & Prof. Code § 14245.

11.6 UCL Compliance. Licensee shall not use the Licensed IP in any manner that constitutes an unlawful, unfair, or fraudulent business act or practice under Cal. Bus. & Prof. Code § 17200.

12. DATA PRIVACY — CCPA/CPRA PROVISIONS

12.1 Applicability. If either Party collects personal information from California residents in connection with this Agreement, the CCPA/CPRA (Cal. Civ. Code § 1798.100 et seq.) applies.

12.2 Service Provider Obligations. If Licensor processes personal information on Licensee's behalf, Licensor shall: (a) process only for specified business purposes; (b) not sell or share personal information; (c) assist with consumer rights requests; and (d) implement reasonable security measures per Cal. Civ. Code § 1798.150.

12.3 Breach Notification. Within [____] hours of discovering a data breach, the affected Party shall notify the other, consistent with Cal. Civ. Code § 1798.82.

13. INDEMNIFICATION

13.1 Licensor IP Indemnity. Licensor shall indemnify Licensee from third-party IP infringement claims, except those arising from: (a) unauthorized modifications; (b) non-Licensor combinations; or (c) use outside the scope.

13.2 Licensee Indemnity. Licensee shall indemnify Licensor from claims arising from: (a) breach; (b) Products; (c) violations of Cal. Bus. & Prof. Code § 17200; and (d) gross negligence or willful misconduct.

13.3 Procedure. Prompt notice, sole control of defense by indemnifying Party, cooperation by indemnified Party.

14. LIMITATION OF LIABILITY AND CALIFORNIA STATUTORY DAMAGES

14.1 Exclusion. EXCEPT FOR WILLFUL MISCONDUCT, BREACH OF CONFIDENTIALITY, AND INDEMNIFICATION, NEITHER PARTY IS LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES.

14.2 No Cap for IP Breach. Liability caps do not apply to IP ownership breaches or Licensed IP misuse.

14.3 Aggregate Cap. For all other claims: fees paid/payable in the preceding twelve (12) months.

14.4 Preserved Statutory Damages. Nothing herein limits:
(a) Exemplary damages under Cal. Civ. Code § 3426.3(c) (CUTSA — willful misappropriation);
(b) Statutory damages under Cal. Civ. Code § 1798.150 (CCPA data breach); or
(c) Penalties under Cal. Bus. & Prof. Code § 17200 (UCL).

15. TERM AND TERMINATION

15.1 Term. Commences on the Effective Date and continues for [________________________________] unless earlier terminated.

15.2 Termination for Cause. Material breach not cured within [____] days after written notice.

15.3 Termination for Insolvency. Immediate termination upon insolvency, bankruptcy filing, or assignment for benefit of creditors.

15.4 Effect. Upon termination: (a) licenses terminate; (b) Licensee ceases use and returns/destroys Licensed IP embodiments; (c) final royalty report due within [____] days; (d) surviving sections: 3, 7–9, 10.4–10.5, 11.1–11.3, 13, 14, 17, 18.

16. DEFAULT AND CALIFORNIA REMEDIES

16.1 Events of Default. (a) Non-payment; (b) breach of confidentiality or IP restrictions; (c) material breach of covenant or warranty; (d) insolvency; (e) UCL violation.

16.2 Remedies. Suspension, acceleration, injunctive relief (Cal. Code Civ. Proc. § 526), exemplary damages for willful trade secret misappropriation (Cal. Civ. Code § 3426.3(c)), termination.

16.3 Attorneys' Fees. Prevailing Party recovers reasonable fees. For trade secret claims: Cal. Civ. Code § 3426.4.

16.4 Statutes of Limitation. Written contract breach: four years (CCP § 337). Trade secret misappropriation: three years (Civ. Code § 3426.6).

17. DISPUTE RESOLUTION — CALIFORNIA SUPERIOR COURT AND FEDERAL COURTS

17.1 Governing Law. California law, without conflict-of-law principles. Cal. Civ. Code § 1646. For transactions over $250,000: Cal. Civ. Code § 1646.5.

17.2 Venue. Exclusive jurisdiction in California Superior Court, County of [________________________________], and United States District Court for the [________________________________] District of California.

17.3 Arbitration.

☐ Elected. Binding arbitration in [________________________________], California, administered by [________________________________], applying California substantive law. Judgment may be entered in any California court.

☐ Not elected. Courts only (Section 17.2).

17.4 Jury Waiver. TO THE FULLEST EXTENT PERMITTED BY CALIFORNIA LAW, EACH PARTY WAIVES JURY TRIAL RIGHTS.

17.5 Injunctive Relief. Available in California courts without bond (to the extent permitted).

18. GENERAL PROVISIONS

18.1 Entire Agreement. Includes Schedules 1–3. Supersedes all prior agreements.
18.2 Amendment. Writing signed by both Parties.
18.3 Assignment. Only with consent, except to Affiliates or successors.
18.4 Severability. Invalid provisions modified to minimum extent; balance continues.
18.5 Notices. Written, by personal delivery, overnight courier, or certified mail.
18.6 Electronic Signatures. Valid per Cal. Civ. Code § 1633.1 et seq.
18.7 Independent Contractors. No agency, partnership, or joint venture.
18.8 Force Majeure. Excuses non-payment obligations for uncontrollable events.

19. EXECUTION

IN WITNESS WHEREOF, the Parties have executed this California IP License Agreement.

SCHEDULE 1 — LICENSED IP PORTFOLIO

SCHEDULE 2 — ROYALTY AND MILESTONE STRUCTURE

Royalty Rate: [____]% of Net Sales

Minimum Annual Royalty (if applicable): $[________________________________]

SCHEDULE 3 — CAL. LAB. CODE § 2870 EMPLOYEE NOTICE

NOTICE TO EMPLOYEE REGARDING CALIFORNIA LABOR CODE SECTION 2870

In accordance with California Labor Code Section 2872, you are hereby notified that the invention-assignment provisions of your employment or consulting agreement do not require you to assign to your employer any invention for which no equipment, supplies, facilities, or trade secret information of the employer was used and which was developed entirely on your own time, unless:

(a) The invention relates, at the time of conception or reduction to practice, to the employer's business or to the employer's actual or demonstrably anticipated research or development; or

(b) The invention results from any work performed by you for the employer.

Full Text of Cal. Lab. Code § 2870(a):

"Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either: (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or (2) Result from any work performed by the employee for the employer."

Employee Acknowledgment:

Name: [________________________________]
Signature: [________________________________]
Date: [__/__/____]

Sources and References

• Cal. Civ. Code § 1622 — Statute of frauds
• Cal. Civ. Code § 1633.1 et seq. — Uniform Electronic Transactions Act
• Cal. Civ. Code § 1646 — Choice of law
• Cal. Civ. Code § 1646.5 — Choice of law ($250K+)
• Cal. Civ. Code § 1798.82 — Data breach notification
• Cal. Civ. Code § 1798.100 et seq. — CCPA/CPRA
• Cal. Civ. Code § 1798.150 — Data breach private right of action
• Cal. Civ. Code § 3426 et seq. — CUTSA
• Cal. Civ. Code § 3426.7 — CUTSA preemption
• Cal. Lab. Code §§ 2870–2872 — Employee invention protections
• Cal. Bus. & Prof. Code §§ 14200–14272 — Model State Trademark Law
• Cal. Bus. & Prof. Code § 14245 — Trademark quality control
• Cal. Bus. & Prof. Code § 16600 — Non-compete ban
• Cal. Bus. & Prof. Code §§ 16600.1, 16600.5 — 2024 non-compete amendments
• Cal. Bus. & Prof. Code § 17200 — Unfair Competition Law
• Cal. Rev. & Tax. Code § 6010.9 — Custom software exemption
• Cal. Rev. & Tax. Code § 18662 — Nonresident withholding
• CDTFA Reg. 1502 — Technology transfer agreements
• Cal. Code Civ. Proc. § 337 — Four-year SOL
• Cal. Code Civ. Proc. § 526 — Injunctive relief

This template is designed for use under California law. It is not a substitute for legal advice from a California-licensed attorney.