Enforcement Clause

Written by: Patrick Shaunessy

28 minute read

What is an enforcement clause?

An enforcement clause is a contractual provision commonly found in license agreements that establishes a licensor and licensee’s respective rights and obligations relating to legal action against third parties for actual, threatened or even suspected infringement of licensed IP rights (third-party infringement). The enforcement clause typically establishes one or both parties’ duty to notify the other in the event of a third-party infringement and may address some or all of the following: (i) who has the right to enforce the licensed IP rights against third-party infringement? (ii) does the non-enforcing party have a duty to support? (iii) how are amounts recovered from any enforcement action to be apportioned? and (iv) who is responsible for the costs of enforcing the licensed IP?

Why does the enforcement clause matter?

When a third party infringes licensed IP rights, it can be damaging to both licensors and licensees. An enforcement clause (along with applicable IP law) can help licensors and licensees evaluate what recourse, if any, they have to protect their respective interests in such cases. For example, if a licensor becomes aware of a third-party infringement that threatens the value of its IP and/or that could cause irreparable harm to its business, it would want to take swift legal action to minimize the damage. The licensor would also want to prevent uncoordinated or even competing enforcement actions from being advanced by one or more licensees. In particular, it would not want any settlement to be reached with the infriger without its participation and consent. Accordingly, in such circumstances, being able to locate the enforcement clauses in all affected license agreements to determine, among other things, whether the licensor has the exclusive or primary right to control any enforcement action would be critical.

How do you review the enforcement clause in contracts?

As the examples below illustrate, the enforcement clause won’t always be labelled as such. Alternative section headings for this clause include “Infringement” and “Infringement by Third Parties”.

After locating all the enforcement language in each agreement, some important things to focus on when reviewing these provisions include:

  1. Obligation to notify. The enforcement clause typically requires at least one party to notify the other of any third-party infringement. The obligation to notify almost always arises when a party “becomes aware”, “knows”, “obtains knowledge”, etc. of a third-party infringement. The clause also often employs words such as “promptly” or “immediately” to emphasize the timeliness with which notice should be provided. Even still, these are not precise terms and they leave room for interpretation, meaning the other party may not be notified of a third-party infringement as quickly as it would want.
  2. Right to enforce. In some cases, such as examples 2 and 10 below, only the licensor has the right to take action against third-party infringements. More often, however, both parties will have this right, but the licensor’s right to enforce will usually take precedence over that of the licensee. Should the licensor decide not to take action or if it abandons its efforts in this regard, then, as illustrated in examples 1 and 4 below, the right shifts to the licensee. Note that the clause may also allow a party to participate - usually at its own expense - in an enforcement action initiated by the other (see example 1 below).
  3. Duty to support. The clause may obligate one or both parties to support the other when addressing third-party infringements. In example 7 below, for instance, this is the only obligation of Party B.
  4. Division of amounts recovered. Not every enforcement clause will address this point; however, when a matter involving third-party infringement arises, clauses that do address it can help parties avoid a dispute over entitlement to any amounts recovered through the enforcement action. Example 1 below, for instance, is quite detailed in this respect and outlines a staged (or “waterfall”) approach to dividing amounts recovered: first, the lead party can use the proceeds to recoup its expenses; then, the supporting party can use the remainder, if any, to cover its costs; and finally, if there is any amount left over after both parties have recouped their respective costs, they share that amount according to the extent of their participation in the enforcement action (unless otherwise agreed). Example 8, on the other hand, employs more of a “controller-takes-all” approach to recovery. In that case, if the Licensor decides to assume control of the enforcement process, then it is entitled to all amounts recovered. Alternatively, if the Licensor elects not to take action and the Licensee does so instead, then the Licensee keeps all amounts recovered.
  5. Expenses. In addition to the recovery of expenses from the proceeds of an enforcement action, the clause may also address other expense-related matters. For example, where one or both parties have a duty to support the other, the clause may address payment of the supporting party’s costs in the matter. Example 3 below, for instance, states that if the party leading the enforcement action asks the other for support, it shall cover the supporting party’s costs. In some cases, such as examples 5 and 6 below, the lead party may also agree to indemnify the supporting party. Furthermore, as noted in point 2 above, where one party can elect to participate in an enforcement action initiated by the other, the clause may provide that the participating party does so at its own expense (as is the case in example 1 below).

As with the review of any contractual provision, it’s also important to be aware of other provisions that may affect the interpretation of enforcement clauses. The notice section, for example, details how and to whom notice needs to be sent for it to be legally binding, which a party would want to check before sending notice of a third-party infringement. Provisions in the contract addressing events of default and remedies outline the consequences of, among other things, breaching the terms of the agreement, which can help parties evaluate the consequences of failing to comply with the terms of the enforcement clause and what remedial rights the non-breaching party would have in that situation. Furthermore, the limitation of liability clause may also provide useful information about a party’s financial exposure should it fail to discharge its obligations under the enforcement clause. Finally, although they are not contractual terms, the provisions of applicable IP law can help parties interpret these clauses and evaluate the rights and obligations they establish.

Software that uses AI to identify and extract enforcement clauses (as well as other terms that may affect their interpretation) can accelerate the work of finding these provisions and enable a more comprehensive review than can otherwise be done manually.

Examples of the enforcement clause

Below are some examples of enforcement clauses from different kinds of agreements. While these examples do not necessarily cover the full range of enforcement clauses one may encounter, they are meant to illustrate the degree to which these provisions can vary from contract to contract. Where an example includes broader contextual language, the enforcement clause is highlighted in bold.

Example 1: From a License Agreement

Infringement. A. Notice of Infringements. In the event that either party becomes aware of any unauthorized use of the Licensed Marks or the Licensed Domain Names, or of any uses of confusingly or substantially similar trademarks, service marks, trade names or domain names, on or in connection with the marketing, advertising or provision of similar goods or services in the Territory (each, an “Unauthorized Use”), such party shall promptly provide the other with written notice thereof. B. Action by Licensor. Licensor shall have the right, but not the obligation, to challenge and attempt to eliminate each Unauthorized Use. Licensee, at Licensor’s expense, shall reasonably cooperate with Licensor in investigating, prosecuting and settling any infringement action instituted by Licensor against any person or entity engaging in an Unauthorized Use. Licensee, at its own expense, shall have the right to participate with counsel of its own choice in the investigation, prosecution and/or settlement of any such infringement action instituted by Licensor. Licensee shall have the right to approve the settlement of any such infringement action, or any other agreement between Licensor and such person or entity concerning the Unauthorized Use, to the extent such settlement or other agreement is inconsistent with the license rights granted to Licensee under this Agreement. C. Action by Licensee. Licensee shall have the right, but not the obligation, to institute, prosecute and settle an infringement action against any person or entity who engages in an Unauthorized Use if, and only if, (i) within ninety (90) days after Licensor becomes aware or is notified of the Unauthorized Use, Licensor has not instituted an infringement action against such person or entity or caused or taken significant steps to cause such person or entity to cease and desist from the Unauthorized Use; or (ii) at any time after Licensor has instituted an infringement action against such person or entity, Licensor ceases to diligently prosecute such infringement action other than by reason of settlement of the action in accordance with the provisions of Section 5.B above. Licensor, at its own expense, shall reasonably cooperate with Licensee in investigating, prosecuting and settling any infringement action instituted by Licensee in accordance with the foregoing sentence. In addition, Licensor, at its own expense, shall have the right to participate with counsel of its own choice in the investigation, prosecution and/or settlement of any such infringement action instituted by Licensee. In the event that Licensee is unable to institute, prosecute or settle the infringement action solely in its own name, Licensor will join such action voluntarily or will execute such instruments and other documents as are necessary for Licensee to initiate, prosecute and settle such action as permitted hereunder, all at Licensor’s own expense. Licensor shall have the right to approve the settlement of any such infringement action, or any other agreement between Licensee and such person or entity concerning the Unauthorized Use, such approval not to be unreasonably withheld or delayed. D. Sharing of Recoveries. Any recovery obtained by either Licensor or Licensee in connection with or as a result of any infringement action contemplated under this Section 5, whether by settlement or otherwise, shall be shared in order as follows: (i) the party that primarily initiated and prosecuted the action shall recoup all of its costs and expenses incurred in connection with the action; (ii) the other party shall then, to the extent possible, recover its costs and expenses incurred in connection with the action; and (iii) unless otherwise agreed on by the parties in writing, the amount of any recovery remaining shall then be divided between the parties in accordance with the relative out-of-pocket costs and expenses they incur in initiating, investigating, prosecuting and/or settling the action.

Example 2: From a Trademark License Agreement

Licensee shall promptly notify Licensor in writing of any known or suspected infringements, imitations, or unauthorized uses of the Licensed Trademarks by third parties. Licensor shall have the sole right and discretion to institute actions against third parties for infringement of the Licensed Trademarks. Licensor shall have the sole right to control any such action instituted by it, including employment of counsel selected by Licensor.

Example 3: From a Technology License Agreement

Infringement. In the event that a party obtains knowledge of any infringement by a third party of any Intellectual Property Rights, such party shall inform the other party promptly of such infringement and provide the other party with the evidence it has of such infringement. If Licensor does not commence action against such infringer within 90 days after learning of the infringement, and Licensee can reasonably foresee that its rights under this Agreement will be materially harmed, Licensee may commence an action against the infringer at Licensee’s expense. At the reasonable request of the party filing suit, the other party, at the expense of the filing party, shall provide reasonable assistance, including, without limitation, permitting the use of their respective names in all suits and signing all necessary documents if appropriate to the situation.

Example 4: From a Product License Agreement

8.02 INFRINGEMENT BY THIRD PARTIES

Either party shall promptly notify the other party of any infringement of any LICENSED PATENTS; misappropriation of a trade secret or declaration of an interference proceeding relating to LICENSED PATENTS or LICENSED KNOW-HOW, and shall provide the other party with all available evidence relating thereto. Licensor and Licensee shall then consult with each other as to the best manner in which to proceed. Licensor shall have the right, but not the obligation, to bring, defend and maintain any appropriate suit or action. If Licensor requests Licensee to join Licensor in such suit or action and Licensee agrees to do so, Licensee shall execute all papers and perform such other acts as may be reasonably required and may, at its option, be represented by counsel of its choice. Licensor shall pay Licensee its reasonable expenses (including its attorney’s fees) in connection with any such suit or action. Should Licensor lack standing to bring any such action, then Licensor may cause Licensee to do so upon first undertaking to indemnify and hold Licensee harmless (to the extent permissible by law) from all consequent liability and to promptly reimburse all reasonable expense (including attorney fees) stemming therefrom. In the event Licensor fails to take action with respect to such matters within a reasonable period, not more than six (6) months, following receipt of such notice and evidence, Licensee shall have the right, but not the obligation, to bring, defend and maintain any appropriate suit or action. If Licensee finds it necessary to join Licensor in such suit or action, Licensor shall execute all papers and perform such other acts as may be reasonably required and may, at its option, be represented by counsel of its choice. Licensee shall pay to Licensor the reasonable expenses of Licensor (including its attorney’s fees) in connection with any such suit or action. Absent an agreement between the parties to jointly bring any action or suit hereunder and share the expenses thereof, any amount recovered in any such action or suit shall be retained by the party bearing its expenses thereof.

Example 5: From a License Agreement

14 INFRINGEMENT AND THIRD PARTY PROCEEDINGS

14.1 Notice of Infringement

(a) Each Party must give the other prompt written notice if it becomes aware of a third party:

(i) infringing or threatening to infringe the Patents, including in the case of Patent Applications, where a third party is Exploiting or threatening to Exploit technology that falls within the scope of a claim in a complete patent specification or that falls within the scope of a statement of invention in a provisional patent specification;

(ii) challenging the validity of the Patents;

(iii) using or disclosing, or threatening to use or disclose Confidential Information of the other Party; or

(iv) taking action or threatening to take action on the basis that a product covered by the Patents infringes the rights of a third party.

14.2 Proceedings or other action

(a) Subject to clause 14.2 (b) and 14.2(c), Licensor will at all times have the right to institute Legal Proceedings against any person infringing the Patents if it is necessary or desirable to do so.

(b) Licensor may not institute, defend or settle any Legal Proceedings without the prior written consent of Licensee. Licensee must not unreasonably withhold its consent with respect to Legal Proceedings.

(c) If Licensee provides consent to Licensor to commence Legal Proceedings, Licensor will be solely responsible for the legal costs, other costs, damages and expenses incurred and will be solely entitled to any damages, profits or other compensation recovered by those proceedings. At the expense of Licensor, Licensee will furnish to it, all reasonably necessary assistance in relation to the Legal Proceedings. Licensor must indemnify Licensee against any claim, action, damage, loss or liability, cost, charge, expense, outgoing or payment which Licensee pays, suffers, incurs or is liable for arising out of or related to such Legal Proceedings or any related action.

Example 6: From a License Agreement

INFRINGEMENTS & EXCLUSIONS

11.1 Each party shall notify the other immediately of any actual, suspected or anticipated infringement of the Trade Mark or any of the Licensed Patents or any misuse of the Confidential Information of which it becomes aware. The notification shall contain suggestions as to the damage or potential damage which either or both parties are then suffering or are likely to suffer from such an infringement or misuse.

11.2 Licensor may in its absolute discretion determine whether or not to take legal or other action against any third party for an actual or threatened or suspected infringement of the Trade Mark or any of the Licensed Patents or any misuse of the Confidential Information in the Licensed Manufacturing Territory or the Licensed Sales Territory, and if Licensor elects to take legal or other action Licensor:

11.2.1 shall bear all costs of the action;

11.2.2 shall have sole control over the form and conduct of such action;

11.2.3 may settle, compromise or discontinue the action as it thinks fit;

11.2.4 shall be entitled to any award of costs and/or damages made in relation to such action; and

11.2.5 shall indemnify Licensee against any costs or damages for which Licensee may become liable as a result of the proceedings provided that Licensee has not authorised or contributed to the acts giving rise to the liability.

11.3 Licensee will give Licensor all authority, information and assistance requested by Licensor to assist it to initiate, litigate, settle or compromise any proceedings by Licensor in respect of any such infringement or misuse.

Example 7: From a Trademark License Agreement

(iv) Party A permits Party B to use the Trademark on all registered goods subject to Clause 2(i). This Licence shall be extended to the companies within Party B’s group, and to Party B’s and its group companies’ suppliers, manufacturers, sub-contractors, etc. within the People’s Republic of China to process, manufacture and produce. However, all the goods and related articles bearing the Trademark cannot be sold in the People’s Republic of China. Party B shall exercise reasonable commercial endeavours to supervise its group companies’ and all relevant suppliers, manufacturers and subcontractors’ compliance with this clause. In the event of any breach of this Agreement by any of its suppliers, manufacturers or subcontractors, Party B shall take action to have them immediately cease and if necessary, bring legal action against them. Party B shall also give such reasonable assistance as may be required by Party A to take action against such supplier, manufacturer or subcontractor for infringement of the Trademark. Party B warrants the quality of its products bearing the Trademark and Party A shall not bear any legal liabilities arising from the manufacturing and export whether within or outside the territory.

Example 8: From a License Agreement

7.3 Prosecution of Infringement Claims

In the event that either Party determines that a Third Party is infringing, encroaching or violating the Patents or any Intellectual Property Rights related thereto, such Party shall notify the other Party promptly of such infringement while detailing as many facts as possible relating to the infringement. The Parties shall consult on a course of action to stop the infringement. Notwithstanding the above, Licensor shall have the primary right but not the obligation to institute and control any action against such Third Party in their name and at their own expense. If, as a result of this action, Licensor decides to bring suit, it shall give prompt notice to Licensee of that fact and Licensee shall take all reasonable steps to assist Licensor. Any amounts so recovered shall belong to Licensor exclusively. Should Licensor elect not to bring a suit against the alleged infringer, Licensee shall have the right, at its option, to commence such action at its own cost and expense, in which case, notwithstanding anything to the contrary herein contained, Licensee shall be entitled to all amounts recovered in such action. The Parties may also elect, without being obliged, to commence such action jointly in which case the Parties will share equally in the costs and expenses, and in the amounts recovered.

Example 9: From a Trademark License Agreement

3.3 Notification of Infringement. Each party shall immediately notify the other party and provide to the other party all relevant background facts upon becoming aware of (i) any registrations of, or applications for registration of, marks in the Territory that do or may conflict with any Licensed Mark, and (ii) any infringements, imitations, or illegal use or misuse of the Licensed Mark in the Territory.

Example 10: From a License Agreement

In the event that the Licensee learns of any infringement or threatened infringement of the Marks or any actual or intended common law passing off by reason of imitation of get-up or otherwise, the Licensee shall promptly notify the Licensor giving particulars thereof and the Licensee will provide all information and assistance as may be required by the Licensor in the event that the Licensor decides proceedings should be commenced. Any such proceedings will be commenced solely at the discretion and expense of the Licensor and will be under the control of the Licensor, and the Licensee hereby relinquishes and disclaims any right it might have to commence proceedings in its own name with or without entering the Licensor as a plaintiff.

Example 11: From a License Agreement

6.2 Notice of Infringement. If, during the License Term, either Party learns of any actual, alleged or threatened infringement by a Third Party of any Licensed Patent Rights in the Licensed Field under this Agreement, such Party shall promptly notify the other Party and shall, to the extent it may lawfully do so, provide such other Party with available evidence of such infringement.

6.2.1 Enforcement. Licensor shall have the right (but not the obligation), which it may grant to any Pharmaceutical Partner, at its own expense and with legal counsel of its own choice, to bring suit (or take other appropriate legal action) against any actual, alleged or threatened infringement of the Licensed Patent Rights. If the alleged or threatened infringement is in the Licensed Field, Licensee shall have the right, at its own expense, to be represented in any such action by counsel of Licensee’s own choice; provided, however, that under no circumstances shall the foregoing affect the right of Licensor (or its Pharmaceutical Partner) to control the suit as described in the first sentence of this Section 6.2.1. If Licensor or its Pharmaceutical Partner brings any such action or proceeding hereunder (i) Licensee agrees to be joined as party plaintiff if necessary to prosecute such action or proceeding, and (ii) at Licensor’s expense, Licensee shall give Licensor or its Pharmaceutical Partner reasonable assistance and authority to file and prosecute the suit, provided, however, that if Licensor’s Pharmaceutical Partner in any such instance is one of the other two (2) Exclusive Licensees, then Licensee shall not be required to disclose any of its Confidential Information to its competitive disadvantage with respect to such other Exclusive Licensee(s), and (iii) Licensor or its Pharmaceutical Partner shall be permitted to settle any such suit without the prior consent of Licensee. For the avoidance of doubt, it is hereby expressly agreed that Licensee shall have the sole right (but not the obligation) to take any action in respect of any actual, alleged or threatened infringement of Licensee Patent Rights.

Example 12: From a Collaboration Agreement

10.3 Enforcement of Patent Rights. The party controlling the preparation, filing, prosecution and maintenance of any Patent Rights shall have the right, in its sole discretion and at its sole expense, to enforce the Patent Rights against infringers. If such party does not, within six (6) months of receipt of notice from the other party of a substantial continuing infringement of such Patent Rights in the Field, abate the infringement or file suit to enforce the Patent Rights against at least one infringing party in the Field in a country, the other party shall have the right, in its sole discretion and at its sole expense, to take whatever action it deems appropriate in its own name or, if required bylaw, in the name of the first party, to enforce such Patent Rights in the Field. The party controlling the enforcement of the Patent Rights may not settle any action or otherwise consent to an adverse judgment in such action that diminishes the rights or interest of the non-controlling party without the express written consent of the non-controlling party. All monies recovered upon the final judgment or settlement of any enforcement action in the Field shall be shared, after reimbursement of expenses, equally by the parties. Notwithstanding the foregoing, the parties shall fully cooperate with each other in the planning and execution of any action to enforce the Patent Rights in the Field.

Example 13: From a License Agreement

Intellectual Property Enforcement

9.1 Licensor hereby undertakes and agrees that at its own cost and expense it will

9.1.1 prosecute or procure prosecution of such of the Patent Rights which are patent applications diligently so as to secure the best commercial advantage obtainable, as determined by Licensor in its commercially reasonable discretion, and will pursue, as determined by Licensor in its commercially reasonable discretion, all necessary actions against any Third Party that Licensor reasonably believes is infringing, misappropriating or violating any Licensor Intellectual Property Rights; and

9.1.2 pay or procure payment of all renewal fees in respect of the Patent Rights to ensure they are valid and subsisting for the full term thereof and in particular will procure such renewal of the registrations thereof as may be necessary from time to time so far as it is reasonable to do so with particular reference to commercial considerations.

9.2 Licensee shall promptly notify Licensor in writing of any infringement or improper or unlawful use of or of any challenge to the validity of the Patent Rights and/or Know-How. Licensor undertakes and agrees to take all such steps and proceedings and to do all other acts and things as may in Licensor’s sole discretion be necessary to restrain any such infringement or improper or unlawful use or to defend such challenge to validity and Licensee shall permit Licensor to have the sole conduct of any such steps and proceedings including the right to settle them whether or not Licensee is a party to them. Licensee shall have the right at its own cost and for its own benefit to initiate, prosecute and control the enforcement of the Patent Rights against infringement by a Third Party in the Territory if all of the following conditions are fulfilled (a) the product manufactured through the infringing activity is a competing product to the Product, (b) Licensor has not granted rights to Third Parties which prevent Licensor from granting such a right to enforce to Licensee, and (c) Licensor does not initiate proceedings within sixty (60) days of being requested to do so by Licensee. If the above conditions are met and if required by law or required for Licensee to have standing in such action, Licensor shall permit the action to be brought in its name, including being joined as a party-plaintiff, provided that Licensee shall reimburse Licensor for any expenses Licensor incurs in connection with such action.

Example 14: From a Distribution, License and Supply Agreement

INTELLECTUAL PROPERTY

9.1 Patent Prosecution

Licensor shall make all determinations in relation to the filing and prosecution of all Licensor Patents. Subject to the following, Licensor shall assume all costs in relation to the filling, prosecution and maintenance of all Licensor Patents. Licensor shall not abandon prosecution or maintenance of any or all Licensor Patents without notifying Distributor in a timely manner of Licensor’s intention and reason therefore and providing Distributor with reasonable opportunity to comment upon such abandonment and to assume responsibility for prosecution or maintenance of such patent rights. In the event that Licensor abandons prosecution or maintenance of any or all Licensor Patents, Distributor may assume prosecution and filing responsibility for such patent rights in the Territory. Distributor shall be entitled to deduct and set off any and all out-of-pocket costs and expenses incurred by Distributor in connection with the foregoing from any amount owing or becoming owed to Licensor hereunder.

9.2 Notification of Third Party Infringement

Each Party shall promptly disclose to the other in writing within ten (10) Business Days, any actual, alleged, or threatened Third Party infringement or misappropriation in the Territory of any Licensor Patent and any actual, alleged or threatened infringement or passing off of the Licensor Marks, of which such Party becomes aware.

9.3 Response to Third Party Infringement

Licensor shall have the first right, but not any obligation, to respond to any actual or threatened infringement of a Licensor Patent, the Licensor Marks or of any unfair trade practices, trade dress imitation, passing off of counterfeit goods, or like offenses in the Territory relating to the Licensed Products. If Licensor elects to respond to any actual or threatened infringement by initiating a proceeding, Licensor shall use legal counsel of its choice at its expense and shall have full control over the conduct of such proceeding. In no event will Distributor be responsible for any costs or expenses associated with such defense unless the Parties have entered into a written agreement in this regard. Licensor may settle or compromise any such proceeding without the consent of Distributor; provided, however, that if such settlement affects Distributor’s rights under this Agreement, or Distributor’s ability to Commercialize the Licensed Products within the Field in the Territory, or otherwise requires Distributor to admit wrongdoing, fault, or liability, Licensor will not settle or compromise any such proceeding without the consent of Distributor, such consent not to be unreasonably withheld, conditioned, or delayed. If Licensor elects not to respond to any actual or threatened infringement of a Licensor Patent, the Licensor Marks or of any unfair trade practices, trade dress imitation, passing off of counterfeit goods, or like offenses in the Field in the Territory relating to the Licensed Products, then Distributor shall have the right, but not the obligation, to take action, at its sole expense, in which case Distributor shall have full control over the conduct of such proceeding and Distributor may settle or compromise any such proceeding without the consent of Licensor; provided, however, that if such settlement affects Licensor’s intellectual property rights or its rights under this Agreement, or Licensor’s ability to Commercialize the Licensed Products outside the Territory or outside the Field in the Territory, or otherwise requires Licensor to admit wrongdoing, fault, or liability, Distributor will not settle or compromise any such proceeding without the consent of Licensor, such consent not to be unreasonably withheld, conditioned, or delayed. Distributor shall be solely responsible for any legal costs or damages awards made in any proceeding that is initiated by Distributor in the event that Licensor elects not to respond to any actual or threatened infringement.

9.4 Cooperation

Distributor will cooperate reasonably in any enforcement efforts initiated by Licensor provided that in no case Distributor will be liable for any costs or expenses associated therewith unless the Parties have entered into a written agreement in this regard. The Parties nor their Affiliates shall contest any joinder in any proceeding sought to be brought by the other Party if such joinder is required by Applicable Law.

9.5 Recovery

Except as otherwise agreed to by the Parties as part of a cost-sharing arrangement, any monetary award recovered from a Third Party in connection with any proceeding initiated to protect, maintain, defend, or enforce any intellectual property in the Field in the Territory or recovered from a Third Party in connection with any proceeding initiated for infringement or misappropriation of intellectual property shall first be used to reimburse the Parties for any out-of-pocket legal expenses relating to such proceeding and the balance being retained by the Party that brought and controlled such litigation.

Example 15: From a License Agreement

ENFORCEMENT BY LICENSOR

3.8 At its sole cost and expense, Licensor may, but will not be obligated to, take all actions, including the institution or defense of legal proceedings, which are reasonably calculated to terminate infringements of, or otherwise to preserve or enforce its rights with respect to, the Licensor IP and the Improvements. Licensor will promptly notify Licensee of any suit or action involving Licensor which directly or indirectly relates to the validity or use of the Licensor IP or the Improvements and will, from time to time, keep Licensee informed of the status of such suit or action. Licensee will, at its sole cost and expense, co-operate, and not interfere, with Licensor’s reasonable actions pursuant to this 3.8. Any proceeds of such actions will be retained by Licensor.

ENFORCEMENT BY LICENSEE

3.9 If Licensor fails to take, within a reasonable time, or refuses a request by Licensee to take, any action referred to in 3.8 to preserve or enforce its rights with respect to the Licensor IP and the Improvements, Licensee may, but will not be obligated to, take all actions, including the institution or defense of legal proceedings, which are reasonably calculated to terminate infringements of, or otherwise to preserve or enforce its rights with respect to, the Licensor IP and the Improvements and will promptly notify Licensor of any suit or action involving Licensee which directly or indirectly relates to the validity or use of the Licensor IP or the Improvements and will, from time to time, keep Licensor informed of the status of such suit or action. Licensor will, at its sole cost and expense, co-operate, and not interfere, with Licensee’s reasonable actions pursuant to this 3.9. If Licensee takes such actions pursuant to this 3.9 and its business is adversely affected, Licensee will be relieved of its obligation to make Royalty Payments to Licensor pursuant to 2.5 with respect to Gross Revenues from the affected jurisdiction in respect of the period during which such action is outstanding and a final resolution has not been reached. Any proceeds of such actions recovered by Licensee in excess of its costs of pursuing such actions, including attorneys' fees, will be used to pay to Licensor the amount of withheld Royalty Payments from the affected jurisdiction that would have been payable in respect of the relevant period if this 3.9 were not applied, and any remaining proceeds of such actions after such payment will be retained by Licensee. Nothing in this 3.9 will affect Licensee’s obligation to pay the Minimum Annual Royalty Payments.