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As a general counsel or in-house lawyer, it is essential to consider intellectual property (IP) whenever your business enters into contracts with another party. Engaging a service provider or collaborating with another party involves managing the: 

  • use of existing IP; 
  • commercialisation of new IP; and 
  • decision making around IP rights. 

These arrangements will also likely result in creating new IP in: 

  • inventions; 
  • documents; 
  • products; 
  • services; 
  • software; and 
  • other material. 

It is important to consider the complexity around intellectual property rights and managing IP at the outset. You should ensure any contracts address potential IP issues sufficiently enough to meet your business’s needs and expectations. This article will outline how best to consider and manage potential IP issues when reviewing contracts, preventing delays and avoiding disputes with the other party.

Defining Intellectual Property

IP refers to creations of the mind, including: 

  • inventions; 
  • literary and artistic works; 
  • designs; 
  • symbols; and 
  • slogans. 

IP is protected in law through: 

  • patents; 
  • copyright; 
  • designs; and 
  • trademarks. 

All of which enable recognition or financial benefit from such invention or creation. 

When reviewing contracts from service providers, it is important to ensure that the contract clearly defines and specifies IP within the contract. You should consider whether both your business and the other party to the intellectual property agreement have pre-existing IP which may be used in this arrangement. If so, the contract should define any pre-existing IP held by either or both parties. 

Any new IP that may be created due to the arrangement should also be specified within the contract. Along with who owns the new IP and how each party may use it. 

Using the Intellectual Property

It is important to also consider your business’ intent for using the IP and ensure that the contract accurately reflects these requirements. When considering how your business can use the IP, you should determine:

  • what IP your business can use. It is important for the contract to define the types of IP to determine what IP your business can use;
  • whether the IP will be assigned or licensed to your business;
  • if there are any limitations on how your business can use the IP. For example, can you only use it for a specific purpose, in a specific location or for a specific length of time?;
  • whether your business can modify the IP in any way, who will be responsible for any modifications and who owns the modifications.

Assignment or Licence 

How your business can use the IP in the contract will largely depend on whether the IP is assigned or licensed to your business. An assignment of IP is an irrevocable transfer of ownership of the IP. An IP licence allows a party to use the IP owned by another under certain circumstances. IP may be licensed to allow either party to:

  • perform the services;
  • commercialise the IP; or
  • sublicense the IP.

Both your business and the other party may wish to retain the IP ownership and rights in any pre-existing IP. However, you can provide each other with a licence to use any pre-existing IP for the purposes of the contract. 

For example, you may grant a marketing agency a licence to use your logo to provide you with their services outlined in the contract, including creating content for your business. 

Additionally, it is crucial to consider whether you will assign or license to your business any new IP created under the contract. Consequently, this will determine how you can use the IP. If the new IP is assigned to you, you can essentially use, modify and exploit it as you please. However, if the new IP is licensed to you under the contract, you should ensure that the licence reflects: 

  • the way in which your business needs to use the IP; 
  • for how long you need to use the IP; and 
  • where you can use the IP. 

For example, if a marketing agency is designing a new logo for a campaign your business is running, the agency should assign the new logo to you. Owning the IP in the new logo through assignment allows you to use the new logo as you please to promote your new campaign, whether that be in digital content or printed on t-shirts.

Third-Party Rights 

When engaging a service provider, you should ensure that they do not infringe the IP rights of a third party in providing services to you. You may also require the service provider to provide you with an indemnity in relation to any third-party IP rights. To clarify, an indemnity is an obligation given by one party to compensate the other for loss.

For example, if a marketing agency is developing a new campaign strategy and content, you want to ensure that they have the right to the IP they provide to you and won’t infringe any third party’s rights. 

You also want the marketing agency to indemnify you for any loss you may incur if they have infringed the IP rights of a third party in developing content for your new campaign. 

Key Takeaways 

IP is a valuable business asset, and so it is important to review IP clauses in detail. In short, it is best to ensure that the IP clause aligns with your business’s expectations by: 

  • clearly defining the IP types in the contract; 
  • considering how your business plans on using the IP; and 
  • ensuring that the contract reflects your business needs. 

If you have any questions about IP clauses, contact LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.

Frequently Asked Questions

What is intellectual property?

Intellectual property (IP) includes inventions, literary and artistic works, designs, symbols; and slogans. The law protects IP through patents, copyright, designs and trademarks. 

What should an intellectual property clause include?

An IP clause should clearly define and specify the IP. It should also outline if both parties can use pre-existing IP in the agreement and the conditions surrounding any new IP created due to the relationship. Additionally, it should include any limitations on how your business can use the IP and whether your business can modify the IP. 

What is the difference between an assignment or licence of IP?

An assignment of IP is an irrevocable transfer of ownership of the IP. Contrastingly, an IP licence allows a party to use someone else’s IP under certain circumstances.

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