Intellectual Property (IP) assets are precious to any business, be it a small enterprise, a startup, or a corporate giant. Thus, it is imperative that the business contracts expressly state which IP is at stake in a given agreement and that the company retains ownership of all such IPs. So, in this article, we will discuss usable ways to handle IP rights in contracts.
What is Intellectual Property?
“Intellectual property” refers to a collection of intangible assets owned by an individual or a corporation. It includes things like literary works, art designs, and even thoughts and ideas that are yet to take a physical form. Ideally, an IP distinguishes your brand from your competitors and helps others identify who you are as a business.
There are various forms of IP assets with the following being some of the most well-known types:
- Copyrights: These are usually original works of art and are the property of the person who first created them.
- Patent or invention: The inventor of a patented product also has full legal ownership of that product.
- Trademarks: These are logos or symbols used to distinguish one seller’s products or services from those of other sellers.
- Trade secrets: The creator, typically a company or its workers, retains ownership of trade secrets or confidential information.
How Do You Create Intellectual Property?
Intellectual property can be created in various ways. Most companies intellectual property (IP) is developed either in-house or by outside parties, such as contractors working to the company’s standards and under its direction. Although companies have the right to the intellectual property (IP) developed by their employees, leaving IP ownership to chance is unwise.
The usual method is for employees to sign an invention assignment agreement when they start working for the company. In addition to protecting the firm’s trade secrets, such an agreement often requires employees to assign to the company any IP they create while on the job or utilizing company resources. To avoid any confusion in the future, these contracts also compel employees to come clean about any inventions they may claim to have created before they started working for the company.
In addition, sometimes businesses form alliances and enter into joint development agreements to produce intellectual property that each company could not produce independently. The contract details the contributions of each party, as well as their individual ownership and usage rights in the resulting work.
What is the IP Licensing Process?
Of course, licensing your IP and monetizing your work is not a novel concept. Most of the revenue for many organizations comes from licensing proprietary software or other intellectual property. However, this can be accomplished faster and more efficiently by using contract management software to create and sign software/IP licensing contracts with clients.
For the uninitiated, though, here’s a list of essential provisions that must be included in an IP license:
- Title of the original work and any derivatives
- Exclusive rights
- Permission to grant sublicenses
- Length of agreement
- Indemnities and warranties
- Confidentiality and non-disclosure clauses
- Permitted and prohibited uses
- License fee
- License expiration and renewal
What are Common Types of IP Contracts?
- Confidentiality or Non-Disclosure Agreement (NDA): Companies enter into NDAs when contemplating partnerships to preserve IP-related information—trade secrets, business strategies, corporate structures, software codes—that is both crucial for the company’s operations and sensitive to outside parties.
- Franchise Agreement: With a franchise agreement (also known as trademark licensing), a company allows another business to use its trademark in exchange for promotional assistance or to operate under the brand itself, provided that the new business adheres to the same quality standards as the original.
- Copyright Licensing Agreement: Under the terms and conditions outlined in the agreement, the owner allows other individuals or businesses to create derivative works (such as reprints), reproduce the original works, or distribute them for financial gain. A royalty or mutually agreed-upon remuneration gets paid to the copyright owner in exchange for this privilege. It is just a temporary license grant to use the work in question and does not give the grantee any ownership over the work itself.
- Inventions Assignment Agreement: Through this agreement, the employer obtains ownership of any work the employee produces while on the job. In most cases, an employee’s work becomes the company’s property once the employment contract specifies as such.
- Research & Development Agreement: A corporation may agree with any individual or group to research and develop a proposed idea, product, or service.
Final Thoughts
You might be a seasoned tech entrepreneur in your own right. Still, you may be unaware of the legal implications of the IP assets of your company. It is significant to contemplate these intangible property rights as they can potentially add massive value to your business. That said, no matter what type of IP contract you create, ensure that it covers all the bases: definition of IP, ownership rights, access, confidentiality, indemnification, and redress in case of breach or violation.
Author Bio:
Qurat-ul-Ain Ghazali, aka Annie, is the growth manager at Contractbook and looks after all the organic channels. She has been with tech startups and scaleups for a couple of years with a B2B focus. You can find her socializing, traveling, indulging in extreme sports, and enjoying the local desserts when she is not working.