In this ever-evolving digital era, protecting intellectual property has become a strategic imperative for most businesses. When entering into a new service agreement, the intellectual property provision will determine who owns the IP, the conditions under which the IP may be used, and a lot more. Defining these clauses clearly is essential for preventing disputes.
Need some help with drafting IP clauses in service agreements? Here are 3 simple tips that will help you set the right expectations from the start.
- Establish Rights and Ownership
Any ambiguity in ownership and rights over IP may lead to legal disputes. This is why it’s so crucial to clarify who will own any IP developed as part of the service. Specify whether the client or service provider will retain ownership or it will be a joint ownership. Don’t forget to define ownership of any IP each party brings to the table before the agreement is signed.
IP ownership also includes license grants. If one party retains ownership of an IP, you’ll need to define the scope of the license granted to the other party. The license can be either exclusive or non-exclusive. You’ll also need to outline the duration of the license and territorial restrictions.
- Include Warranties and Indemnities
Warranties and indemnities protect IP holders against infringement claims. For best results, both parties should provide warranties that the IP won’t infringe on the rights of any third party. This will show that each party is confident in the legality of their contributions, which can provide security and mitigate many reputational and financial risks in the long run.
It’s also important to define indemnification obligations if the use of IP by one party leads to infringement claims. Define who will bear the costs of damages and legal defenses. Consider adding a liability limitation clause as protection against excessive damage.
- Define the Scope of Use and Restrictions
Outlining how IP can be used is the first step toward preventing unauthorized exploitation or misuse. To make this happen, clearly articulate the scope of use for the IP. This can include specific regions, projects, or durations. You should also define any restrictions for the use of the IP, which may include forbidding modification, sublicensing, or reverse engineering.
Another thing that can help set expectations is to include a provision that ensures your IP and any related information will stay confidential at any stage of the agreement. Verify that neither party will be able to disclose this information to third parties without written consent.
- Copyright Ownership
Copyright IP ownership is strictly governed by “work-for-hire” statutory provisions or the agency provisions established by the Supreme Court with respect to the arrangement of the engagement. If copyright ownership is important, then you should seek the assistance of an attorney to ensure that these rights are properly transferred.