Building an intellectual property clause

Most disputed terms WCC ranking: 

19

Most important terms WCC ranking: 

16

Most negotiated terms WCC ranking: 

12

What is Background IPR

A provider may have to bring a couple of things to the table to perform the service. For example, the provider’s know-how, their systems and technology. The provider may have certain intellectual property rights in respect of the know-how, systems and technology. These rights are referred to as the Background Intellectual Property Rights (Background IPR).

What is Foreground IPR

Foreground Intellectual Property Rights (Foreground IPR), are intellectual property rights that arise due to the activity conducted under the Agreement.

What is the purpose of an Intellectual Property clause in a services agreement?

The Intellectual Property clause determines which Party owns which intellectual property that will be used or created during the Agreement. The Intellectual Property clause may also provide for various obligations in respect the intellectual property, for example, an obligation to assist with the registration of intellectual property.

Components of an Intellectual Property Clause

What is Background IPR

The devil is in the details when it comes to definitions.

Usually, Intellectual Property Rights is defined separately from Background IPR, and you should therefore start with the definition of Intellectual Property Rights.

The Intellectual Property Rights definition may also contain various embedded defined terms. For example, Know-How and Patents. 

We like to keep all these definitions close together under the Intellectual Property clause, so you don’t have to page back and forth between the definition section and the clause.

Here are examples of definitions that you may need when building your Intellectual Property clause:

Backround IPR means, by reference to a Party, all Intellectual Property Rights, excluding Foreground IPR, owned by such Party or any of its Affiliates, or licensed or made available by a third party to such Party and under which such Party is authorised to grant licenses.

Intellectual Property Rights means unpatented inventions, Patents, trademarks, service marks, trade names, domain names, copyrights (including rights in software), moral rights, rights in designs, Know-How, database rights, topography rights, mask work rights, utility models and all other intellectual property rights and forms of protection of a similar nature, licences to such rights, in each case whether registered or pending registration, and rights to apply for any such rights.

Know-How means all knowledge, drawings, specifications, samples, models, instructions, algorithms, working methods, ideas, concepts, technology, applied development engineering data, reports, notes and all other technical or commercial information, data and documents of any kind.

Patent means all patents and patent applications in any jurisdiction in the world, including any divisional, continuation, continuation-in-part, reissue, renewal, re-examination or extension thereof.

Licence in respect of Background IPR

Generally, a “project licence” is provided in terms of which each Party licences their Background IPR to the other for purposes of and to the extent required to perform their obligations under the Agreement. Without such a licence, an infringement question may arise.

It may happen that some of the Background IP will be used to create the Foreground IP. If this is the case, you want to be clear on the terms of the Background IPR licence. In other words, you want to expressly stipulate the scope of the Background IPR licence.

You will need to consider:

  • To whom is the Background IPR licenced (does it include Affiliates)?
  • What can the licensee do under the licence? Modify, distribute, sell create derivative works etc?
  • Are there any restrictions? For example, restrictions relating to territory, field of use, external use etc.
  • What about assignment and sub-licensing?

TIP!

If you are acting for the client/customer, the typical licence you would require in this regard is a worldwide, no-charge, royalty-free, perpetual, irrevocable, exclusive, sublicensable licence.

Feedback

You can learn a lot working on a complex project. If you are the Provider, you want to know that if the client provides feedback on your services, systems and tech that you can use that feedback. This is where the feedback clause comes in.

Usually, a feedback clause will provide that any ideas, comments, or suggestions relating to the Provider’s Background IPR will be owned by the Provider and the Provider can use or disclose the Feedback for any purpose

What is Foreground IPR

Basically, anything that is created as a result of the activities conducted under the Agreement.

Here is an example definition:

Foreground IPR means all Intellectual Property Rights that arise as a result of or in the context of any activity pursuant to this Agreement.

Who owns the Foreground IPR

Most of the time the Foreground IPR will be owned by the client/customer paying for the work. There are situations where the Provider would want to own the Foreground IPR. If this is this case, the Provider will need to provide a licence to the client/customer to enable them to use the Foreground IPR.

If the client/customer will be owning the Foreground IPR, it is also possible to exclude certain IP that will not be owned by the client/customer. In other words, to carve out certain Foreground IP that will be owned by the Provider. This approach may be an acceptable compromise during tough negotiations but should be treated with caution.

TIP!

If you are acting for the client/customer, and when Foreground IP is carved out in favour of the Provider, make sure that a perpetual licence is provided to the client/customer with all the usual rights (in other words, the client can use, modify, create derivative works etc. under the licence.)

Obligations relating to Foreground IPR

The Provider will likely be creating most of the Foreground IPR. To enable the client/customer to exercise their rights, the Provider will need to provide the client/customer with all documents and info relating to the Foreground IPR and may need to sign a couple of documents to register the Foreground IPR. Ensure that the obligations surrounding the Foreground IPR are expressly stated and that you also stipulate who foots the bill to fulfil the Foreground IPR obligations.

FAQ Question 1

Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

FAQ Question 2

Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

FAQ Question 3

Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Table of Contents