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What are the Crucial Provisions that Should Be Included in the Intellectual Property Clause of a Contract

What are the Crucial Provisions that Should Be Included in the Intellectual Property Clause of a Contract

In most contracts, the section on intellectual property is usually being known to parties as the clause which enumerates the items that may be used or developed in the course of the agreement and the respective owner of the Intellectual Property of such items. At times, this clause is being neglected due to a notion that intellectual property clause has already a standard template which is sufficient enough to protect each party’ s IP. However , if a contracting party is not thorough in reviewing the IP clause, there will be a possibility of missing some important matters to protect its interests.

The assignment of IP under this clause is the most important provisions that a contracting party should include in the contract. The assignment simply states that the party that may develop certain technology, innovation or formula on behalf of the other party should acknowledge in the contract that it automatically assigns its rights in the intellectual property of the developed items and that it would perform, accomplish and sign any documents that may he required in assigning the IP.

The absence of any assignment under the IP clause will  be detrimental to the party that is claiming and is supposed to be entitled to the said IP. Possible IP claims are fatal and embarrassing to its supposed owner. In one known case, a big golf company, to its surprise, received a demand letter from the graphic artist who designed its logo. Despite the fact that the company had already spent millions for marketing purposes from the first time it used the subject logo, the graphic artist contended that he had not assigned the copyright on the logo to the company and hence he should be paid for the assignment. Consequently, the company settled the matter by paying one (1) million dollars in order to secure the assignment of IP on the logo. Certainly, the said disputes can be avoided if the IP clause had been thoroughly reviewed by the lawyer of the company.

It bears stressing that not all IP clause template has an assignment clause, hence the same should always be checked to ensure that the parties would sign a contract with an efficient IP clause which practically covers all possible scenarios that will cover any disputes later on.

A model IP clause usually states the following: Customer shall have all right, title and interest, including worldwide ownewrship of all Intellectual Property Rights, in to and under the Work Product. Supplier irrevocably assigns and will cause Supplier’ employees and agents to irrevocably assign to Customer , without further consideration, all rights and titles to the Work Product. Supplier acknowledges that Customer and the assigns of Customer will have right to obtain and hold in their own name said Work Product and Supplier agrees to execute any documents or take any other actions  necessary to perfect Customer’s ownership in said Work Product.

If the aforementioned provisions are incorporated in the contract, then the customer who engaged the services of third person to develop certain copyrightable materials will no longer encounter problems such as paying the creator of materials a huge amount of money just to execute the necessary documents to perfect the assignment.

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