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Contracts and Ownership of Intellectual Property

13 August 2018

Intellectual property (IP) is an important part of doing business. However, determining who owns the IP arising from a transaction can be complex.

Start with the contract

The first place to start is the agreement between the parties. Generally, it's better to ensure that the terms of the deal are written down and agreed to by the parties. This helps to make the arrangements clear.

If there is a written agreement, chances are it will have clauses dealing with IP. If it does, then the clauses must be interpreted to determine who is the owner of the IP.

The contract may also cover:

  • What is the scope of IP in the transaction? (What is included? What is excluded?)
  • What happens with IP outside the scope of the transaction?
  • What is the price (if any) for transfer or use of the IP?
  • If the IP is assigned from one party to the other, when does that assignment occur? (Does one party have to 'opt in'?)
  • What other conditions affect the IP in the transaction?

What if there's no IP clause?

Difficulties can arise if:

  • there is no written agreement at all; or
  • the agreement doesn't address the intentions of the parties; or
  • the way the agreement addresses the intentions isn't adequate or appropriate.

It is not correct to simply assume that if A pays B for a product or service, then A automatically owns the IP created by B in providing the product or service.

By paying for services, A is in fact paying for B's time, labour and expertise.

By paying for a product, A is in fact paying for the physical object.

A might be entitled to use the IP, but A might not own the IP. In some circumstances, B may even be able to re-use or license that IP to someone else! (eg another customer, or even a competitor.)

There are some limited statutory exceptions, but the basic position is that, without an agreement, the creator owns the IP.

This reality is commonly misunderstood and often causes disputes between parties later on.

Employees

It is important for employees and employers to understand their rights in relation to IP.

This applies to both employee-generated IP and existing or future employer IP.

Many standard employment contracts contain an IP assignment clause. This clause usually assigns all IP created by an employee to the employer.

Under the Copyright Act, an employer owns the copyright in work created by their employees pursuant to their employment - unless there is a contrary agreement.

As well, it is important to consider how the employment agreement covers:

  • IP created outside the scope of employment duties (eg IP created in the employee's "own time" or on their own device/equipment)?
  • permitted use and handling of employer IP and confidential information during employment
  • post-employment restraints on the use of employer IP.
  • moral rights (such as the right of an individual to be attributed as an author)

Summary

IP law can be counterintuitive in the absence of a clear statement of the parties’ contractual intentions.

When it comes to IP, there are definite advantages in a clearly-drafted written agreement.

Xuveo Legal can provide advice, preparation and review of commercial contracts and intellectual property agreements. Contact us for further information and assistance.

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