Business owners beware: Do you own or have the right to utilize the key intellectual property of your company?
Every company considers some form of intellectual property (“IP”) to be valuable. A trademark (for example, a logo, business name, or product name), copyright (for example, software code, an instruction manual, or website content), or a trade secret or patent are the examples of IP (for example, a novel and useful invention or recipe). A business owner has to invest in the development of such IP.
Your company, on the other hand, may not own the IP, may not even have the right to use it or may have a limited right to use it.
An independent contractor, by default, owns any copyright, inventions, and intellectual property it develops. Whenever a business hires a photographer to take photographs, the photographer maintains ownership of the photographs he or she captures, and the business may only have relatively restricted rights to use the photographs unless there is an agreement indicating otherwise. IP assignments and licenses can be used as stand-alone agreements or as part of a variety of other agreements, such as service agreements.
The definition of an IP Assignment
When a company hires an independent contractor to create IP, the best-case scenario is that the independent contractor assigns the IP to the company. A permanent transfer of ownership of all IP rights to the assignee in exchange for payment is known as an IP assignment. The rights are sold and transferred in the same manner that physical property is sold, and the seller maintains no rights (unless a license-back provision is included in the assignment).
It is essential to have legal counsel in the appropriate country assess any IP assignments to guarantee that the assignor does not retain any IP rights. Certain rights, such as moral rights to copyright, cannot be transferred in some jurisdictions and must be explicitly assigned in others.
IP License Definition
A grant clause in an IP license allows the author or inventor to keep ownership of the IP while granting the company owner limited rights to use it in exchange for a one-time or ongoing charge (royalty). Permission might be granted for a set period of time or for a specified purpose. A confidentiality clause, a termination clause, and clauses detailing the implications of termination – including the return or destruction of the IP at the end of the term – should all be included in an IP license.
The following are the three most prevalent types of licenses:
- Non-exclusive Licence. A non-exclusive license allows the licensor to retain the right to use the IP and the right to grant unlimited licenses to third parties.
- Sole Licence. A sole license allows the licensor to retain the right to use the IP but cannot grant licenses to any third parties.
- Exclusive Licence. An exclusive license means that the licensor cannot use the IP and it cannot grant licenses to any third parties.
An IP license can place geographical restrictions on IP rights. Furthermore, you may only be able to use the IP for specific reasons. A marketing research company, for example, may have only given you permission to utilize the study findings for internal reasons, and any other users would be a breach of contract.