In this blog, we will shed light on a few standard contract types relevant for safeguarding your intellectual property.
Why care about contracts?
Intellectual property rights are property rights. This means, that someone is the owner of these rights. The owner has the right to determine who may use what is protected by his rights.
Typically, the original owner of intellectual property rights is the creator (note: this does not apply to trademarks), i.e. the individual who makes an invention (patent) or creates a work (copyright). However, as soon as several parties become involved in the creation of intellectual property, the legal reality concerning the rightful owner might often significantly deviate from the expectations of the parties.
For instance, if the original owner is an employee of a company, there are countries in which the rights created by the employee belong directly to his employer or in which the employee is at least required to transfer his rights to his employer if the employer wants to acquire these rights. If on the other hand, you engage a freelancer to create something, the intellectual property rights to that creation might stay with the freelancer, in spite of you having financed the creation.
Another example would be if we have several people from different organizations collaborate, such as in research or development. These joint collaborators may become joint-owners of the new creations. In these circumstances, it should be contractually agreed which party has which rights in the jointly created intellectual property, or you might end up not being able to commercially use your intellectual property without the other person’s consent.
However, these situations can be contractually anticipated and regulated. Intellectual property rights may be transferred from one owner to another owner. This may happen by way of a full transfer of all rights (like a sale, a so called “assignment”,) or by granting someone else certain use rights (like a lease, a so called “license”). The use rights may be customized in particular with regards to the scope, the time or territory.
Finally, contracts may be important to preserve your intellectual property rights in the first place, because patents and design rights may be “forfeited” if you disclose your invention or design to a third party without appropriate confidentiality clauses in place.
Employment Agreement / Freelancer Agreements
As explained above, it is important that intellectual property rights developed by your employees belong to the employer. Therefore, it is advisable to include a standard IP-clause in your employment agreements. If you have employees domiciled abroad, local laws need to be taken into consideration. Further, in certain settings, in particular if some of your employees are still partly employed with Universities, this topic needs to be addressed very carefully.
If you use consultants or other personnel not employed by your company, it is crucial to include in the consulting, freelancer or other agreement rules to ensure that you own the intellectual property rights created by these agents, as if they were employees. Absent such clauses, there is a significant risk that you do not own (all) the intellectual property rights created by these parties despite having funded the respective creation.
Confidentiality Agreement (NDA)
The confidentiality agreement or non-disclosure agreement (NDA) is an agreement that permits the parties to share certain confidential information before entering into any specific contract. Often, NDAs are used to evaluate a possible cooperation, which requires that certain business or technical secrets and know-how are exchanged.
It is crucial to define the scope of the confidential information clearly (for instance: is all information disclosed confidential, or does it need to be marked in a certain way). Further, it is important to keep track of the duration of the agreement and potential “survival” of certain obligations.
Be aware that the typical confidentiality agreement is not an appropriate substitute for the collaboration agreement between the parties. In practice, we often come across relationships of parties for which only an NDA exists. Most NDAs, however, lack provisions on jointly developed intellectual property etc.
Research and Development Agreements
Research and development agreements are the right instrument if you provide or source research services or product/software development. They are not suitable to be used for the manufacturing, sale or supply of the product, which may follow upon the development. However, it may be advisable to already fix some key aspects of a potential supply agreement.
R&D agreements need careful drafting, not only for addressing intellectual property rights but also for various other reasons (such as “do you owe a result or just careful work”, default, warranties, liability, etc. ). From an intellectual property perspective, there need to be rules about existing technology (often referred to as “background”) and access to it as well as clauses on newly developed intellectual property (often referred to as “foreground”). On the foreground, topics such as ownerships, use rights, obligation to prosecute and maintenance of patents, cost etc. need to be addressed.
License Agreements
License agreements are concluded to grant use rights on intellectual property rights that you own. It is key to determine the scope of the license, for instance whether you grant a license to the patent or only for certain products, the geographical scope, whether sublicensing should be allowed, for how long the license lasts, etc.
In return, the remuneration (license fee, royalty) must be clearly defined and understood by both parties. Many disputes arise from unclear provisions pertaining to royalties.
Assignment Agreements
Intellectual property rights can not only be licensed but also transferred to another party. Through an assignment agreement the owner of e.g. a patent transfers all of its rights related to such patent to the assignee which subsequently is the new owner of the right.
It is important to note that the transfer of IP rights requires the compliance with various formalities. Ultimately, the assignment will normally have to be registered with the relevant national authorities. These national authorities may have different requirements to a transfer of rights and often request various documents to ensure the validity of the assignment.
