In this article, we have a look at some of the important aspects that must be kept in mind when drafting Intellectual Property clauses.
Intellectual Property Rights refer to the various legal protections granted to creators and owners of intangible assets resulting from intellectual activities. These rights protect their creations and give them control over how these assets can be used by others. Here’s a breakdown of some of the components of Intellectual Property Rights that you will often find in tech conctracts:
Copyrights: Legal protection for original works, such as software code, written materials, graphics, and multimedia. It grants the owner exclusive rights to reproduce, distribute, and modify the work.
Moral rights: Rights of the creator to be recognized as the author of the work and protect the work’s integrity, including the right to object to any distortion or modification that could harm their reputation.
Inventions and patents: Legal protections for new, useful, and non-obvious inventions, granting the inventor exclusive rights to make, use, or sell the invention for a limited time.
Trademarks: Protects brand names, logos, and symbols that identify a company or its products and services, preventing competitors from using similar marks that may confuse consumers.
Designs: Protects the visual appearance of a product, including its shape, configuration, pattern, or ornamentation, which gives it a unique look and distinguishes it from other products.
Data and database rights: Legal protections for the collection and organization of data in a database, restricting unauthorized copying or extraction of the data.
Domain names: Unique web addresses that help users find a specific website, often protected to prevent others from using a similar name to confuse or divert users.
Confidential information and trade secrets: Protects sensitive information, such as business strategies, customer lists, and proprietary technologies, from being disclosed to competitors.
Know-how: Refers to practical knowledge, experience, and skill in a particular field, which may not be patentable but still valuable for a business.
In tech contracts, these Intellectual Property Rights help ensure that the parties involved can maintain control over their creations and negotiate terms for licensing, collaboration, or transfer of ownership.
Whether the Provider will be providing a professional service, consulting services or a software development service, the Provider will be using and incorporating its existing intellectual property (especially know-how) when creating the assigned deliverables for the project or task.
The situation can also be reversed. Take for example a project where the provider will only be licensing the deliverables to the client. During the project the client may required to use their Intellectual Property to provide important input and feedback that may improve the deliverables. With this situation it is also important to make provision for the use of Client’s existing intellectual property rights for the project.
In the context of above, the following components are typically covered under intellectual property clauses dealing with existing intellectual property:
Definition of Intellectual Property: This section defines the types of intellectual property, such as patents, trademarks, copyrights, know-how, trade secrets, and other proprietary rights, that are relevant to the contract.
Existing Intellectual Property: This refers to the intellectual property owned or controlled by the service provider prior to the execution of the contract. The contract should explicitly acknowledge the provider’s ownership of this IP and clarify that the existing IP is not being transferred to the client.
Project License: To ensure that the parties does not infringe on the each others existing intellectual property rights, the contract should grant a “project license.” This license allows the a party to use the provider’s existing IP, but only within the scope of the project. The license is generally non-exclusive, non-transferable, and limited to the purpose of the project.
It is essential to carefully craft these clauses to strike the right balance between the interests of both parties and avoid potential disputes over intellectual property rights.
The purpose of the Assigned Variables section is to set out the ownership, rights, and obligations of both parties concerning the Assigned Deliverables and related Intellectual Property Rights.
Under most tech contracts where a service is provided, the Assigned Deliverables will be dealt with as “work made for hire”.
Where the Assigned Deliverables are regarded as “work-made-for-hire”, the contract will stipulate that the Client is the sole and exclusive owner of all rights, title, and interest in the Assigned Deliverables, including all Intellectual Property Rights.
It is possible that certain Assigned Deliverables will not be regarded as “work-made-for-hire”. If this is the case, an assignment provision must be included – the Provider will assign all rights, title, and interest in these Assigned Deliverables and related Intellectual Property Rights to the Client.
Whenever Intellectual Property Rights are assigned, the Client may require some additional comfort that there will not be any problems down the line concerning the Assigned Deliverables.
A non-assert clause can be included to address the Client’s concerns. These clauses generally provide that the Provider must not challenge the validity or enforceability of any Intellectual Property Right related to an Assigned Deliverable obtained or applied for by the Client, or take any action that may affect its validity or enforceability.
Additionally, the Provider may also be required to waive moral rights. This is because, in some legal jurisdictions, moral rights cannot be assigned/transferred.
The waiver of moral rights will generally provide that the Provider waives all moral rights (e.g., rights to be identified as the author or to object to any modifications) relating to Intellectual Property Rights in the Assigned Deliverables, to the extent permitted by applicable laws.
The purpose of the Licensed Deliverables section is to outline the permissions, rights, and obligations of both parties concerning the Licensed Deliverables and associated Intellectual Property Rights.
In many tech contracts where a service is provided, Licensed Deliverables are distinct from Assigned Deliverables and are not considered “work made for hire”. Instead, the Provider grants the Client a license to use the Licensed Deliverables within the scope defined in the agreement.
When dealing with Licensed Deliverables, the contract will typically specify that the Provider retains ownership of all rights, title, and interest in the Licensed Deliverables, including all Intellectual Property Rights. The Provider then grants the Client a non-exclusive, royalty-free, and sometimes sublicensable license to use, reproduce, distribute, display, and perform the Licensed Deliverables within the parameters set forth in the agreement.
By clearly defining the ownership, rights, and obligations associated with Licensed Deliverables, both parties can ensure a smooth and successful working relationship while minimizing potential disputes related to Intellectual Property Rights.
The purpose of a Retained Intellectual Property Rights clause is to clarify the ownership and rights of each party concerning Intellectual Property Rights throughout the term of the agreement.
The Retained Intellectual Property Rights clause typically stipulates that each party retains ownership of their pre-existing Intellectual Property Rights. For instance, the Provider maintains ownership of its cloud infrastructure, software, and other services, while the Customer retains ownership of its data, applications, and any proprietary software or systems used in conjunction with the cloud services.
By incorporating a Retained Intellectual Property Rights clause in your tech contract, both the Provider and the Customer can safeguard their Intellectual Property Rights, establish clear guidelines for usage, and minimize the risk of disputes or legal issues related to Intellectual Property ownership and licensing.
Feedback rights in tech contracts refer to the provisions that govern the process of providing, receiving, and utilizing feedback, suggestions, or comments from one party to another, typically from the customer to the provider. These rights are crucial in the context of technology contracts because they help drive improvements, enhance user experience, and facilitate a better understanding of customer needs and expectations.
The main purpose of a feedback rights clause is to address ownership of any feedback, ideas, or suggestions provided by the customer. This ensures that the provider has the right to use, modify, and incorporate the feedback into its products or services without any legal complications or additional obligations.
By including feedback rights in tech contracts, both parties can foster a collaborative environment that encourages continuous improvement and adaptation. The customer can contribute to the development and enhancement of the product or service, while the provider gains valuable insights and the rights to use the feedback to refine its offerings.
In Reseller Agreements, the Intellectual Property Provision concerning the Provider’s Brands is designed to protect the Provider’s trademarks, logos, and other branding elements when the Reseller is marketing, promoting, or distributing the product/service.
This clause typically includes the following key components:
Ownership: The provision clearly states that the Provider retains full ownership of its brands, trademarks, logos, and other branding elements. This ensures that the Reseller acknowledges and respects the Provider’s intellectual property rights.
License Grant: The Provider generally grants the Reseller a limited, non-exclusive, non-transferable, and revocable license to use the Provider’s brands solely for the purposes of marketing, promoting, and distributing the software in accordance with the terms and conditions of the agreement. This license allows the Reseller to legally use the Provider’s branding elements in their promotional activities.
Usage Guidelines: The provision may specify that the Reseller must adhere to the Provider’s brand usage guidelines, which outline how the Provider’s trademarks, logos, and other branding elements must be displayed or used. This ensures consistency and proper representation of the Provider’s brand identity.
Quality Control: The Provider may reserve the right to review and approve any marketing materials, advertisements, or promotional content featuring its branding elements. This enables the Provider to maintain control over its brand image and reputation.
No Modifications: The provision typically prohibits the Reseller from modifying or altering the Provider’s branding elements in any way, ensuring that the Provider’s brand identity remains intact and consistent across all channels.
Termination: Upon termination or expiration of the agreement, the Reseller must immediately cease using the Provider’s branding elements and remove them from any marketing materials or promotional content.
In the context of a Reseller Agreement, the Intellectual Property Provision specifically related to the Provider’s Brands aims to safeguard the Provider’s brand image and intellectual property rights while enabling the Reseller to effectively market and distribute the products under the terms of the agreement.
This clause helps maintain brand consistency, control over brand representation, and ensures that the Provider’s intellectual property rights are respected throughout the term of the agreement.