Licence Grant Clause

Written by: Patrick Shaunessy

27 minute read

What is a license grant clause?

A license grant clause is a contractual provision that establishes one party’s (a licensor) agreement to allow another party (a licensee) to use its intellectual property (IP) subject to certain conditions. Generally speaking, a licensor’s IP is protected by law against unauthorized use by a third party. The license grant clause is a way for contracting parties to establish specific exceptions to this general prohibition by allowing a licensee to use the subject IP for certain purposes.

License grant clauses are, of course, commonly found in license agreements. However, as the examples below illustrate, these clauses can also be found in other kinds of contracts, including manufacturing agreements, service agreements, supply agreements and distribution agreements. Although the primary purpose of these agreements is generally not to license IP, it may nevertheless be necessary for one party to license certain IP to the other for the purposes of their commercial relationship.

Why does the license grant clause matter?

When negotiating contracts that include license grant clauses, parties may not always consider the long-term implications of certain features like exclusivity rights, territorial limitations or restrictions on permitted use. However, as time passes and needs change, licensors and licensees may find that the terms of these clauses no longer suit their respective strategic and/or commercial interests. For example, unfavorable license terms might prevent a licensor or licensee from winning new business or accessing new markets, or they might even make a given licensor or licensee less valuable to a prospective purchaser. When these problems surface, it may be too late (not to mention costly) to consider renegotiating or even terminating some of these contracts. By proactively reviewing license grant clauses in their contracts, licensors and licensees can better anticipate these kinds of issues and take appropriate action to mitigate their effects in a more timely manner.

Furthermore, while it is important for licensors and licensees to know the details of license grant clauses in their contracts, this information may also be of interest to certain third parties. A prospective purchaser in a M&A transaction, for example, will usually be interested in, among other IP-related matters, identifying and evaluating these clauses in a target’s contracts. In addition to things like anti-assignment terms, the purchaser would also want to consider other features of these clauses, such as the type(s) of IP involved, permitted use (and any restrictions on permitted use), territory, royalties, exclusivity, etc., since these details may affect negotiations and/or the purchaser’s willingness to move forward with the transaction.

How do you review the license grant clause in contracts?

After locating all the license grant language in each agreement, key things to focus on when reviewing these provisions include:

  1. What is being licensed and for what purpose. As the examples below illustrate, license grant clauses often include one or more defined terms, such as “Intellectual Property” (see examples 1, 2 and 13 below), “Trademarks” (see examples 2 and 8 below), and “Software” (see example 7 below) to indicate the particular IP being licensed. Be sure to check the definition(s) of any such term(s) to confirm the details of any and all IP that is subject to the license. In addition, the license grant clause should indicate the scope of the licensee’s permitted use of the subject IP, including details of any field of use or other usage restrictions. The portion of the clause describing the permitted use(s) of licensor’s IP can be quite detailed, and it is important to review this part carefully to ascertain what is and is not allowed under the license.
  2. Whether the license is exclusive. Most licenses are either exclusive or non-exclusive, and the license grant clause should indicate this. Examples 2, 9 and 12 below, for instance, are exclusive licenses. Exclusive licenses can be valuable to licensees, but the restrictions they impose can be a burden to licensors. Accordingly, when reviewing agreements with license grant clauses, it is important to determine whether the license is exclusive; and if so, to consider the implications of this exclusivity given the purpose of the review.
  3. Duration. The license grant clause typically includes information about the duration of the license. Example 1 below is an example of a limited duration license; whereas, example 7 below is an example of a perpetual license. Note that in cases where the duration is limited, it is often tied to the term of the agreement. In some cases, however, if a license is exclusive, the exclusivity may be limited to a period that is shorter than the term, after which the license becomes non-exclusive.
  4. Territory. It is not uncommon for licenses to be effective only in certain countries or regions. In such cases, the license grant clause will typically use a defined term - often “Territory” - to indicate this. As with the defined terms relating to the licensor’s IP discussed in point 1 above, be sure to check the definition(s) of any such term(s) to confirm the territory to which the license applies. If a license is exclusive, limiting its geographic scope can be a way for the licensor to soften the impact that the exclusivity right may have on its business. Examples 8 and 10 below are worldwide licenses, though in both cases the license is non-exclusive.
  5. Any restrictions on transfer, assignment, sublicensing, etc. License grant clauses may include language that addresses whether or not the licensee may (i) transfer or assign a license and/or (ii) sublicense its interest in the license to third parties. Restrictions on assignability or transfer may be of particular interest to a purchaser in an M&A transaction - especially one that is acquiring a licensee. In that case, the purchaser would want to consider whether its acquisition of the target licensee would be considered an “assignment” or “transfer” for the purposes of that license and, if so, how that would affect the license post-acquisition (e.g., could the licensor terminate the agreement or revoke the license?). In addition, if the clause (and the agreement more generally) is silent on the subject of assignment, transfer, etc. of the license, be sure to confirm how these rights are addressed under applicable law.
  6. Royalties and other financial terms. Licenses may or may not bear royalties. Should the clause indicate that royalties are payable in respect of the license, be sure to take note of this; and if the amount of the royalty is not specified in the clause, it should be stated elsewhere in the agreement along with milestone payments and other relevant financial terms. As examples 2 and 4 below indicate, where no royalty is payable, the clause may, for greater certainty, include the phrase “royalty-free”. Similarly, if the clause includes the phrase “fully paid-up” (see example 8 below), this may indicate that the licensee has paid a lump sum up front for the license, the amount of which should again be stated somewhere in the agreement.

As with the review of any contractual provision, it’s also important to be aware of other provisions that may affect the interpretation of license grant clauses. Defined terms, for example, were mentioned in points 1 and 4 above. Where the duration of a license is tied to the term of the agreement, the term clause (and the renewal clause) will provide information about when the contract starts and how long it lasts. The pricing terms may contain information about royalties and other amounts that the licensee must pay to the licensor for the license. The enforcement clause sets out the parties’ obligations in the event of a third party infringement of the subject IP. Finally, although they are not contractual terms, the provisions of applicable IP laws can help parties interpret these clauses and evaluate the rights, duties and restrictions they establish.

Software that uses AI to identify and extract license grant 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 license grant clause

Below are some examples of license grant clauses from different kinds of agreements. While these examples do not necessarily cover the full range of license grant 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 license grant clause is highlighted in bold.

Example 1: From a License and Distribution Agreement

ARTICLE 2 — GRANT OF LICENSE

2.1 License. Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee, and Licensee accepts, for the Term of this Agreement: (a) a non-exclusive, non-transferable and non-assignable (except as provided in Section 17.1), non-sublicensable and revocable license under the Licensed Intellectual Property in the Territory, to (i) Manufacture the Product, and (ii) import the Amino Acid in powder form and other components of the Product, as necessary to Manufacture the Product; (b) an exclusive, non-transferable and non-assignable (except as provided in Section 17.1), non-sublicensable and revocable license under the Licensed Intellectual Property, to (i) maintain the NPN, (ii) seek and maintain any other Regulatory Approvals, and (iii) import into the Territory the Product, in each case as necessary to market, promote, distribute, sell and offer to sell the Product in the Field in the Territory; provided, however, that, with respect to Licensor Data, such license shall be a non-exclusive, non-transferable and non-assignable (except as provided in Section 17.1), non-sublicensable and revocable license to use Licensor Data in the Field in the Territory solely for the purpose of supporting its activities under this Agreement as exclusive distributor of the Product in accordance with Sections 4.5 and 8.4.

2.2 Ownership of Intellectual Property. Licensee agrees and acknowledges that, as between the Parties, Licensor or its licensors own all rights, interests and title in the Licensed Intellectual Property. Nothing in this Agreement shall effect or be deemed to effect the transfer or conveyance to Licensee of ownership of any property of Licensor, its Affiliates or licensors, including but not limited to the Licensed Intellectual Property and any Trade-marks. As between the Parties, all proprietary rights or rights of ownership with respect to any property of Licensor, its Affiliates or licensors shall at all times remain solely with Licensor, its Affiliates and licensors, as applicable, and Licensee shall have no rights in or to property of Licensor, its Affiliates or licensors other than those expressly granted herein.

2.3 Maintenance of Intellectual Property. Pursuant to the ownership rights set forth in Section 2.2, Licensor shall be solely responsible for prosecution, maintenance and enforcement of all rights in and to the Licensed Intellectual Property in the Field and in the Territory, except with respect to Regulatory Approvals as set forth in Section 3.2.

2.4 Internet Sales.

a) During the Term of this Agreement, Licensee shall have the sole right to sell the Product in the Field in the Territory through the [website]. Licensee shall assist Licensor to create the necessary links between the [website] and [website], such that Canadian users will be directed to the [website] and non-Canadian users will be directed to the [website] operated by or on behalf of Licensor.

b) Promptly after expiration or termination of this Agreement, Licensee shall transfer to Licensor or its designee all rights in the [website] name and shall execute such further documents and instruments as are reasonably requested by Licensor or its designee to perfect such transfer.

Example 2: From a License and Supply Agreement

8.1 License of Licensor Intellectual Property. Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee, commencing on the Transition Date and for the duration of the Term, a royalty-free, exclusive (including with respect to Licensor except as to Licensor’ performance of its obligations under this Agreement) license (with the right to sublicense solely in accordance with Section 8.4) in the Field in the Territory, under the Licensor Intellectual Property, to develop (to the extent required for Licensee fulfill its obligations hereunder), use, offer for sale, sell, import, market and promote Product.

8.2 Licensor Trademarks.

(a) Grant of License. Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee, commencing on the Transition Date and for the duration of the Term, an exclusive, royalty-free license (with the right to sublicense in accordance with Section 8.4) to use the Licensor Trademarks solely in connection with the Product in the Territory. Licensee may use the Licensor Trademarks on Product subject in all respects to all applicable laws and Regulatory Requirements. Nothing in this Agreement shall obligate Licensee to identify Product, or to use Licensor Trademarks with respect to Product; provided, however, that if Licensee uses a mark other than (i) the Licensor Trademarks or (ii) any mark related to the name of Licensee or any Affiliate of Licensee in respect of the Product, to the extent Licensee has the right to do so without obligation of payment or additional liability to any Person, the Parties shall negotiate in good faith to grant in writing to Licensor a reasonable paid-up, royalty-free license for Licensor to use such alternative mark in respect of sales by Licensor or any affiliate, licensee or sublicensee thereof for the Product solely as would be necessary with respect to sales of the Product outside of the Territory (and, following any termination of this Agreement in accordance with Section 14.2, sales of the Product inside the Territory).

Example 3: From a Software License Agreement

  1. License Grant. Licensor hereby grants Licensee a non-exclusive license to use Licensor’s products and related documentation, if any, listed in Appendix A (the “Product” or “Products”) pursuant to the terms hereof including the attached Appendices that are incorporated by reference. Each unit of Product may be used on one computer and Licensee may make one copy of the Product in machine-readable form for backup purposes only. Licensor reserves all rights not otherwise expressly granted to Licensee in this Agreement. This license is not a sale and no rights are granted to Licensee with respect to any source code, trade secrets, trademarks, copyrights or other intellectual property that is incorporated into or related to the Product except as otherwise expressly provided for herein. Any modifications made to the Product, whether made by Licensor or Licensee, shall be the sole and exclusive property of Licensor. Licensee agrees and certifies that neither the Product nor any other technical data received from Licensor, nor the direct product thereof, will be exported outside the United States except as permitted by the laws and regulations of the United States.

Example 4: From an OEM Agreement

  1. SOFTWARE LICENSING RIGHTS

3.1. License to OEM. Subject to the terms of this Agreement, Licensor hereby grants to OEM (including its Affiliates) a non-exclusive, royalty-free, fully-paid license and right to use, copy, market, distribute and demonstrate the Licensed Materials in the Territory in carrying out OEM’s rights and obligations under this Agreement. Such rights shall not include sub-licensing the Licensed Materials except as permitted in Section 3.2.

3.2. Right to Sublicense. Subject to the terms of this Agreement, Licensor hereby grants to OEM (including its Affiliates) a non-exclusive, royalty-free, non-transferable, right to sublicense the Licensed Materials (directly or indirectly through one or more tiers of distribution) to its Customers and End-Users located in the Territory solely for use with the Equipment purchased or leased by such End-Users. Each sale of Equipment shall include a non-exclusive, royalty-free, fully-paid license for the Licensed Materials which OEM may transfer and sublicense to its Customers and End-Users within the Territory. Except as set forth in this Agreement, no right or license is granted by this Agreement to OEM to use, copy, sublicense or otherwise transfer the Licensed Materials apart from the Equipment or to make any modifications or derivative works to the Licensed Materials. OEM shall not copy the Licensed Materials in whole or in part, except as reasonably necessary for distribution or maintenance of the Equipment. All copies of the Licensed Materials must contain all proprietary marks, legends and copyright notices that appear on the original copies delivered to OEM by Licensor…

6.8.2. Technology License. Subject to the terms and conditions of this Agreement (including without limitation any payment obligations), OEM shall have and Licensor hereby grants to OEM, a limited, non-exclusive, non-transferable, non-sublicensable license to view, use, modify and make derivatives of the Escrowed Materials, at no charge, sufficient to enable OEM to “step into Licensor’s shoes” to manufacture the Equipment and Licensed Materials, provided, however, that with respect to OEM’s right to exercise the Make or Manufacture Option for Finished Products, OEM shall be required to pay Licensor a license fee for the Escrowed Materials in such an amount to be negotiated by the parties at the time of such release. OEM shall only seek to exercise this license to the Escrowed Materials in the event of a Release Condition, and only for no more than the shorter period of (i) thirty (30) months following the first release of the Escrowed Materials, or (ii) one (1) year following the expiration or earlier termination of the Term of this Agreement.

Example 5: From a License Agreement

ARTICLE 2. LICENSE GRANT

2.1 Licensor hereby grants to Licensee and its current subsidiaries and affiliates a non-exclusive, non-transferable (except as set forth in Article 7), right and license, under the ABC Patent and under the EFG Patent to make, have made, use, sell, offer for sale, and import the Licensed Products.

2.2 Other than as set forth in Section 2.1, Licensee and its current subsidiaries and affiliates shall not have any right to sublicense any of the rights granted in Article 2.1 to any third party without the prior written consent of Licensor.

Example 6: From an Access and Security Agreement

  1. License. Subject to subsection (a) below, Supplier hereby grants the Customer a non-exclusive worldwide, irrevocable, fully paid right and license to use any Intellectual Property necessary or helpful for the manufacture of the Component Parts for the Customer’s use and/or use by third parties (the “License”). The Customer’s right to use the License shall include the right to grant one or more third parties sublicenses for the manufacture of Component Parts, provided, however, that any sublicensee must satisfy the terms of this Agreement and sublicensing will have no effect on the Customer’s obligations under this Agreement.

Example 7: From a Software License and Services Agreement

2.2 Grant of Licenses. Provider hereby grants to Company, with respect to Software obtained hereunder by Company, a worldwide, non-exclusive, non-transferable (with the express exception as set forth hereunder), perpetual license (each such license being referred to herein as a “License”) to do the following:

(i) To use such Software for Company’s business purposes, without limitation on the number, size, or type of servers, workstations, barcodes printers, or instruments interfaced, but limited to such number of concurrent users and such designated locations as specified in Software Description Appendix(es) attached hereto. (ii) To make copies of such Software for backup, archival, and disaster recovery purposes and use such copies for those purposes. To the extent Provider’s proprietary or copyright notice has been provided to Company by Provider in writing, Company shall reproduce and include such notice on such copies of the Software. If such proprietary notice appears in machine-readable form, Company shall make reasonable efforts to reproduce such notice in such form.

(iii) To merge or interface any machine readable form of the Software licensed hereunder with any other software to form an enhanced, improved, updated or otherwise modified software program (each such modified software program, a “Company Enhancement”). Provider shall have no rights to any Company Enhancement, including without limitation the rights to use or receive any such Company Enhancement. However, all Software included in any such Company Enhancement shall remain subject to the terms and conditions hereof.

(iv) To use and modify the Software to generate, develop or compose software programs which do not include or contain any part of the Software licensed hereunder (each, a “Generated Program”), and to use, copy, modify, perform, transmit, access, sell, license, distribute and otherwise exploit such Generated Programs and to license others to do any of the foregoing. Company shall own all such Generated Programs and shall have no liability or obligation to Provider relative to the composition, use, sale or other disposition of such Generated Programs.

Example 8: From a Shared Services and Supply Agreement

9.1 Trademark License Grants.

(a) Subject to and expressly conditioned upon compliance with the terms and conditions of this Agreement, during the term of this Agreement, Licensor hereby grants to Licensee the non-exclusive, non-transferable (other than as part of an assignment of this Agreement in accordance with Section 10.6), royalty-free, fully paid-up, worldwide right and license to use the Licensor Trademarks solely for the Licensee Licensed Uses; provided that Licensee complies with the quality and use guidelines set forth in Exhibit B-1 attached hereto and as may otherwise be provided by Licensee from time to time in writing (collectively, the “Licensor Trademark Guidelines”). Licensee shall not have the right to grant any sublicenses under the license granted to Licensee pursuant to this Section 9.1(a) without Licensor’s prior written consent. As between the parties, Licensor is the sole and exclusive owner of all right, title and interest in and to the Licensor Trademarks and all rights related thereto and goodwill associated therewith. All uses of the Licensor Trademarks and the goodwill arising therefrom shall inure solely to the benefit of Licensor. Licensee shall ensure that all its uses of the Licensor Trademarks comply with, and are in accordance with, the Licensor Trademark Guidelines and all applicable Laws. Licensor shall have the right, upon reasonable written notice to Licensee, to inspect (during reasonable business hours mutually agreed upon by the parties) the use of the Licensor Trademarks by Licensee (including with respect to the nature and quality of any products manufactured, offered for sale, sold or otherwise commercialized by Licensee in connection with any Licensor Trademarks that are covered by the Licensee Licensed Uses) to confirm that Licensee have complied with the Licensor Trademark Guidelines to the extent necessary for Licensor to carry out appropriate quality control hereunder for the purpose of protecting and maintaining the Licensor Trademarks, including the goodwill associated therewith. Unless otherwise mutually agreed by the parties, such inspections shall not exceed more than one during any six (6) month period during the term of this Agreement. In determining whether any

Licensee uses of the Licensor Trademarks meet the Licensor Trademark Guidelines, Licensor shall act reasonably and in good faith.

(b) Subject to and expressly conditioned upon compliance with the terms and conditions of this Agreement, during the term of this Agreement, Licensee hereby grants to Licensor the non-exclusive, non-transferable (other than as part of an assignment of this Agreement in accordance with Section 10.6), royalty-free, fully paid-up, worldwide right and license to use the Licensee Trademarks solely for the Licensor Licensed Uses; provided that Licensor complies with the quality and use guidelines set forth in Exhibit B-2 attached hereto and/or as may otherwise be provided by Licensee from time to time in writing (collectively, the “Licensee Trademark Guidelines”). Licensor shall not have the right to grant any sublicenses under the license granted to Licensor pursuant to this Section 9.1(b) without Licensee’s prior written consent. As between the parties, Licensee is the sole and exclusive owner of all right, title and interest in and to the Licensee Trademarks and all rights related thereto and goodwill associated therewith. All uses of the Licensee Trademarks and the goodwill arising therefrom shall inure solely to the benefit of Licensee. Licensor shall ensure that all of its uses of the Licensee Trademarks comply with and are in accordance with the Licensee Trademark Guidelines and all applicable Laws. Licensee shall have the right, upon reasonable written notice to Licensor, to inspect (during reasonable business hours mutually agreed upon by the parties) the use of the Licensee Trademarks by Licensor (including with respect to the nature and quality of any products manufactured, offered for sale, sold or otherwise commercialized by Licensor in connection with any Licensee Trademarks that are covered by the Licensor Licensed Uses) to confirm that Licensor have complied with the Licensee Trademark Guidelines to the extent necessary for Licensee to carry out appropriate quality control hereunder for the purpose of protecting and maintaining the Licensee Trademarks, including the goodwill associated therewith. Unless otherwise mutually agreed by the parties, such inspections shall not exceed more than one during any six (6) month period during the term of this Agreement. In determining whether any Licensor uses of the Licensee Trademarks meet the Licensee Trademark Guidelines, Licensee shall act reasonably and in good faith.

(c) No Other Rights. Except for the rights and license expressly granted to each party under this Section 9.1 and Section 10.3, no right, title or interest of any nature whatsoever is granted whether by implication, estoppel, reliance or otherwise, by Licensor or Licensee to the other with respect to any Intellectual Property. All rights with respect to Intellectual Property that are not specifically granted herein are reserved to the owner thereof.

Example 9: From a Product License and Distribution Agreement

1.1 Grant of License. The Licensor hereby grants unto the Licensee an exclusive license to market, sell, and distribute the Product, and all improvements, variations, generations, and replacements thereto, in the Territory and subject to the terms and conditions of this Agreement.

Example 10: From a Transition Services Agreement

5.3 Pre-Existing Materials. If in the course of performing services under this Agreement, Executive incorporates into any Work Product developed hereunder any invention, improvement, development, concept, discovery or other proprietary information owned by Executive or in which Executive has an interest: (i) Executive will inform the Company, in writing before incorporating such invention, improvement, development, concept, discovery or other proprietary information into any Work Product; and (ii) Executive hereby grants the Company, under all of Executive’s rights therein, a nonexclusive, royalty-free, perpetual, irrevocable, worldwide license to make, have made, use, sell, import, reproduce, distribute, perform, display, and prepare derivative works of, same as part of or in connection with such Work Product.

Example 11: From an Employment Agreement

9.2 Intellectual Property.

(a) The Executive owns (i) the Executive’s Legal Name and Variants thereof, and (ii) the Executive’s Likeness (collectively, “the Executive Intellectual Property”). The Executive hereby grants to the Company the exclusive right to use the Executive Intellectual Property during the Employment Term in connection with the business of professional wrestling and any other business in which the Company is now or during the Employment Term will be engaged, including, but not limited to, the exclusive rights to license, reproduce, manipulate, promote, expose, exploit and otherwise use the Executive Intellectual Property. The Executive hereby grants to the Company the non-exclusive right to use the Executive Intellectual Property after the Employment Term, as provided elsewhere herein. The Executive further acknowledges and agrees that the Company shall own in perpetuity all Works (including without limitation the Footage), as defined in Section 8.4 of the Agreement, and that the Company shall have perpetual rights in such Works, irrespective of the inclusion in such Works of the Executive Intellectual Property.

Example 12: From a Patent License Agreement

  1. GRANT OF RIGHTS

(i) Licensor grants to Licensee an exclusive license to manufacture and have manufactured, to market and have marketed, to sell and have sold, and to distribute the Licensed Technology and any Licensed Product in the Territory, with right of assignment or sublicense to a third party upon written approval of Licensor, which approval shall not be unreasonably withheld. The exclusive rights are limited based on prior commitments and contracts that Licensor has entered into; therefore certain other parties will have rights to use the Licensed Technology on similar Licensed Products as does the Licensee. The additional parties previously granted rights to use the Licensed Technology are limited exclusively to those detailed in Appendix B.

(ii) Licensor retains the right to approve clients of the Licensed Products, which approval shall not be unreasonably withheld.

Example 13: From a Purchase and Security Agreement

(d) The Company hereby grants to Lender an irrevocable, non-exclusive license (exercisable upon the termination of this Agreement due to an occurrence and during the continuance of an Event of Default without payment of royalty or other compensation to the Company) to use, transfer, license or sublicense any Intellectual Property now owned, licensed to, or hereafter acquired by the Company, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer and automatic machinery software and programs used for the compilation or printout thereof, and represents, promises and agrees that any such license or sublicense is not and will not be in conflict with the contractual or commercial rights of any third Person; provided, that such license will terminate on the termination of this agreement and the payment in full of all Obligations.

Example 14: From a Joint Venture Agreement

ARTICLE 12. Trademark License

12.1 Forthwith following the registration of Newco and the establishment of the Subsidiary, Company shall cause Newco or the Subsidiary to be granted a limited license to use the Trademarks in the Territory for the manufacture of Footwear.

Example 15: From an Aircraft Lease

8.4. Alterations, Modifications and Additions. Lessee shall make or cause to be made, at its own expense, such alterations and modifications in and additions to each Aircraft, Airframe and Engine as may be required from time to time to meet the standards of the FAA or other governmental authority (domestic or foreign) having jurisdiction and to enable the airworthiness certificate for the Aircraft to be maintained in good standing at all times under the applicable rules and regulations of the FAA and any other governmental authority having jurisdiction. In addition, upon written consent of Lessor, Lessee, at it own cost and expense, may, from time to time make such alterations and modifications in and additions to the Aircraft, Airframe or any Engine as Lessee may deem desirable in the proper conduct of its business, including without limitation, removal of Parts which Lessee deems obsolete or no longer suitable or appropriate for use in the Aircraft, Airframe or such Engine (such parts, “Obsolete Parts”); provided, however, that no such alteration, modification or addition shall materially diminish the value or utility of the Aircraft, Airframe or such Engine, or impair the airworthiness thereof, below the value, utility, and airworthiness thereof immediately prior to such alteration, modification or addition assuming the Aircraft, Airframe or such Engine was then of the value or utility and in the condition required to be maintained by the terms of this Lease except that the value (but not the utility, condition or airworthiness) of the Airframe or any Engine may be reduced by the value of Obsolete Parts which shall have been removed so long as the aggregate original cost of all Obsolete Parts which shall have been removed and not replaced shall not exceed $300,000; provided further, that any value received by Lessee in respect of the sale or use of such Obsolete Parts shall be paid to Lessor on a net after-tax basis. Title to all Parts on the Aircraft, Airframe or Engine as the result of such alteration, modification or addition shall, without further act, vest in Lessor. Notwithstanding the foregoing sentence of this Section 8.4, so long as no Lease Default under Sections 14 (a) , (b) , (h) or (i) hereof or Lease Event of Default shall have occurred and be continuing, lessee may, at any time during the Term, remove any Part if (i) such Part is in addition to, and not in replacement of or substitution for, any Part originally incorporated in any Aircraft, Airframe or Engine at the time of delivery thereof hereunder or any Part in replacement of or substitution for any such Part, (ii) such Part is not required to be incorporated in such Aircraft, Airframe or Engine pursuant to the terms of this Section 8, and (iii) such Part can be removed from such Aircraft, Airframe or Engine without diminishing or impairing the value or airworthiness required to be maintained by the terms of this Lease which the Aircraft, Airframe or such Engine would have had at such time had such alteration, modification or addition not occurred. Upon the removal by Lessee of any Part as above provided, title thereto shall, without further act, vest in Lessee and such Part shall no longer be deemed part of such Aircraft, Airframe or Engine from which it was removed. Any Part not removed by Lessee as above provided prior to the return of such Aircraft, Airframe or Engine to Lessor hereunder shall remain the property of Lessor. Lessee hereby grants to Lessor a perpetual, non-exclusive, royalty free license in any supplemental type certificates relating to any of the alterations, modifications or additions performed, being performed or to be performed on the Aircraft and which are necessary or desirable for the operation of the Aircraft, effective on the earlier of (i) the Redelivery Date as such term is defined in the Modification Contract or (ii) the date upon which there shall have occurred a Lease Event of Default.