Contracts: Make Sure There is an Intellectual Property Ownership Clause

If you own a business you have entered into contracts with others for various purposes. However, you may not fully understand the legal implications of contracts that require you to provide a product or service implicating some form of intellectual property, such as trademarks, copyrights, patents and trade secrets.

This is but a brief synopsis of the potentially disastrous results that can befall a company that does not exercise scrupulous care drafting provisions that protects its valuable intellectual property interests. It is always good practice to hire an attorney with skill and experience negotiating and drafting these types of agreements. Always remember that each word in a contract has meaning and legal effect. Clarity is key.

These “intangible property’ rights and interests may be of considerable value to your company moving forward. In such cases, it is therefore crucially important that the contract clearly and concisely address the issue of ownership of any intellectual property. It may be beneficial to your company to retain ownership of this intellectual property. In that case, your company will want to insist that the contract contain a clear, express provision that both identifies the intellectual property that is subject to the agreement and that ownership of it will remain with your company.
A case-in-point is the “work-for-hire” agreement relating to ownership of original works of authorship created under the agreement. Here, for example, you hire another person to take a photograph of you in front of your business, or a graphic design or software program for your company. Under current U.S. copyright law, unless your contract contains a clause that specifically and expressly creates a work-for-hire arrangement in which ownership of the copyright vests in your company, all your company gets is the product but not the copyright in it. The creator of the product would retain the copyright and the important exclusive rights conferred on the holder of copyright by applicable federal law.

As evidenced by the following sample provision, these same general principles apply to contracts involving not only copyright, but other intellectual property rights, as well:

“A.1. Ownership of Intellectual Property Rights and Interests. All patentable and unpatentable inventions, discoveries, ideas, source code, materials, and other intellectual property (hereinafter “Materials”) which are developed by CONTRACTOR for COMPANY under the terms of this AGREEMENT shall be deemed to be works made for hire, and shall belong exclusively to COMPANY, and COMPANY shall be the sole owner of all copyrights, patents, inventions, discoveries and trade secrets in the same, including the right to change, edit, and distribute same throughout the world. To the extent that any Materials may not be deemed works made for hire, CONTRACTOR hereby irrevocably assigns to COMPANY all its right, title, and interest therein.”