Advisory Case on Reviewing the Extension of a License Agreement Term and Structuring the Renewal

1. The Client's Situation

The client carried on a business utilizing a particular brand and content, and had concluded and operated license agreements. However, due to the short-term contract structure, it bore uncertainty regarding business continuity after the contract's expiry. In particular, since contract renewal or re-contracting was largely subject to the counterparty's discretion, securing the recoverability and stability of long-term business investment emerged as an important task. Accordingly, it requested advice on whether legally effective mechanisms could be put in place in connection with extending the contract term.

After reviewing the provisions of the existing license agreement, Your Legal Team compared and reviewed several structural measures that could secure the stability of contract extension and re-contracting. Specifically, we presented various alternatives, such as granting a right of first negotiation and a right of first contract, introducing a conditional automatic-renewal clause, combining a multi-year contract with a right of mid-term termination, and a phased contract-term extension option. In addition, we examined together the option of concluding a legally binding memorandum of agreement separate from the main contract, and proposed a direction that could substantially strengthen the client's negotiating position without excessively increasing the counterparty's burden.

Through the advice, the client clearly recognized the legal options related to contract extension and established structural criteria that it could use in the course of negotiation. Through this, it laid a foundation that could mitigate the uncertainty arising from the short-term contract and enhance business continuity and investment stability. As a result, it achieved the outcome of securing a negotiating framework favorable to the client even in future re-contracting negotiations.

As in this case, the term and extension structure of a license agreement is a core element directly connected to business stability. Your Legal Team supports companies' mid- to long-term business strategies through advice on reviewing license agreements, designing contract-term extension structures, and managing re-contracting risks.