Can an intellectual property licence last forever?

In life sciences and other innovation-led sectors, intellectual property (IP) licences are often central to the deal. The duration of the IP licence is frequently critical as to whether a product can be commercialised, whether a platform can be scaled, and whether investment risk is acceptable. In many cases, the answer is straightforward: patent licences commonly track the life of the patent. Sometimes a licensee needs something akin to a “forever” licence, particularly where the licensor’s IP is embedded in a deliverable (for example, a plasmid or cell line) and the licensee’s operations depend on uninterrupted rights. The Court of Appeal’s decision in Zaha Hadid Limited v The Zaha Hadid Foundation is a useful reminder that, under English law, achieving that outcome depends on precise language and coherent termination mechanics.

The case

The dispute arose from a 2013 trade mark licence granted by Dame Zaha Hadid to her wholly owned company, Zaha Hadid Limited, to use “ZAHA HADID” registered trade marks. The licence was worldwide, non-exclusive, and levied a 6% royalty on all services, regardless of whether the licensee used the trade marks. The duration clause stated that the licence would “continue indefinitely, unless terminated earlier in accordance with clause 12”. Clause 12, however, was asymmetrical; it gave the licensor express termination rights, including a right to terminate without cause on three months’ notice, but it did not give the company any express right to terminate.

After Dame Zaha’s death in 2016, the Zaha Hadid Foundation became the licensor and the company’s ownership changed. The company sought to terminate, in part to renegotiate the 6% royalty. At first instance, the judge held that the company had no right to terminate and remained bound to pay the 6% royalty.

The Court of Appeal took a different view. It held that “indefinite”, read in its contractual context, did not demonstrate an intention to create obligations in perpetuity. Instead, the Court inferred a right for the company to terminate on reasonable notice. A restraint of trade argument had been raised (and rejected) at first instance, but the Court of Appeal did not need to address it given its conclusion on termination. An application for permission to appeal to the Supreme Court is pending, so we may not yet have the final word.

Drafting guidance

For drafting purposes, the most important aspect of the decision is the Court of Appeal’s treatment of language. The Court distinguished “indefinite” from “perpetual”, indicating that “perpetual” is more likely to convey an intention to be bound forever. The absence of reinforcing terms such as “irrevocable” or “non-terminable” also mattered. In addition, the licensor’s express unilateral right to terminate led the Court to doubt that the parties objectively intended a truly perpetual arrangement.

Construction of contracts

The decision also illustrates how English courts approach construction. The test is objective: what a reasonable person, with the relevant background knowledge available to the parties at the time, would understand the words to mean. The language used in the contract, and its commercial implications are both important. While recent authorities emphasise the primacy of the language used, in the present case the Court of Appeal appears to have given considerable weight to “sense” – straying towards aspects of contract construction that are not currently favoured by the English courts, namely something tantamount to a business efficacy test. In this case, the Court of Appeal referred to the business logic (or lack thereof) of a perpetual arrangement in the circumstances, and the economics of the deal, particularly the royalty structure, which were a key part of the context against which the Court assessed whether perpetual obligations were intended.

It is important to remember that governing law matters. The interpretative approach is jurisdiction-specific, and this case suggests that under English law “indefinite” and “perpetual” are not interchangeable. If another law governs, the same words may be treated differently, and local advice is essential, particularly where the commercial outcome depends on fine distinctions in drafting.

Connected parties

There are broader lessons, too. The licence was agreed when the parties were closely connected, and the company did not seek independent advice. The judgment records an expectation that the company would become independent over time. That is a familiar pattern; terms that seem acceptable when interests are aligned can become contentious after a change of control, new investors, or a strategic pivot. Drafting should anticipate that possibility rather than assuming the relationship will remain unchanged.

Takeaways

So, what does this mean for parties who genuinely want a “forever” licence?

• Be explicit about duration. If perpetuity is the commercial objective, use “perpetual” and consider reinforcing it with “irrevocable” and “non-terminable”.
• Ensure the termination provisions are consistent with that objective. If one party is to have unilateral rights, make it explicit that the termination rights are intended to be unilateral.
• Document the commercial rationale in the contract itself, not ancillary documents. Recitals can help explain why a perpetual licence is necessary, for example, because deliverables incorporate licensor IP and the licensee’s business depends on uninterrupted rights. That context can support the objective interpretation you want a court to adopt.

This case does not exclude the possibility of forever licences of IP under English law.  However, clear and unambiguous language is needed to demonstrate that the parties’ intention, judged objectively, is to create a licence which can never be terminated (or can never be terminated by one party). Using clear language and unambiguous recitals, understanding the impact of the choice of law, and anticipating and drafting for future changes to the relationship of connected parties are all key to ensuring that your legal agreement is going to be easier to interpret in the future and therefore less likely to lead to future litigation.

If you have questions or concerns about IP licences, please contact Vicky Clark or Maureen Kelly.