This article is written by Richa Ray, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com.
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Do you know what a contract template is? A contract template is a blank, standard form that can be filled in with the information used as a contract. They are often used in the same situations where the same agreement will be made over and over again, with very little information being changed.
Let’s try to understand it clearly. When we draft a contract we often take the help of a contract which already exists with all the legal terms and conditions and sometimes it is just a form in which we have to fill the details of the contract that we are drafting.
Almost all the contracts have same structure like date, parties to the contract, recitals, terms and conditions etc. and for almost all the contracts a sample is easily available but there are many contracts which need a special attention when it comes to drafting minute details and which can be done only by an expert so that there is no scope left for any dispute in future. A small blog or website will be safe using a generic terms and conditions template, but businesses need to include clauses specific to their operation and copying from a reputable company won’t help them to emulate instead, it could confuse users and potentially land people in legal trouble.
In this article I’m going to discuss a sample Inventions Assignment Agreement.
Let us first understand what is Inventions Assignment Agreement. It is an agreement by which an employer gets certain rights over inventions created by the employee during their employer-employee relationship. It is a common feature of an employee agreement which can be found as confidential information or in the invention assignment agreement separately with the offer letter or employment agreement.
Why is it important for the Companies to have an Inventions Assignment Agreement?
Intellectual property means creations of the mind and protection of this creation is important at all the stages for a company’s growth. While starting a business company makes it’s employees sign various documents. The employer should make sure that the employees sign Inventions Assignment Agreement which might look unimportant in the beginning but becomes really important as the company starts growing. Sometimes, potential investors, buyers or strategic partners also want to know whether employees have signed Inventions Assignment Agreement. However, having an Inventions Assignment Agreement in place does not always means that the employer has the right over all the intellectual property related to the invention but having this agreement avoids all the disputes in future about the ownership of intellectual property.
This agreement might have certain clauses like it may ask the employee to list down all the inventions made by him before joining the employer’s company which means that anything that has been mentioned in the list cannot be claimed as the property of Owner.
This article is from the point of view of the Employer.
Sometimes, the employer has confidential information that has not come in front of public or research or development that can develop into types of intellectual property. To protect this kind of intellectual property Companies can come up with different types of agreement which are-
- Non-compete agreements, which can protect a company by limiting the place/scope/time of work for a former employee with a new company.
- Employment agreements, which typically have specific intellectual property provisions stating that all work done by the employee using company resources and/or on company time shall be wholly owned by the company.
- Assignments, which add another layer of protection to ownership of intellectual property. For example, if employee files a patent application, he should be sure that the employee/inventor immediately executes an assignment of the invention to the company and that this is recorded with the Patent office. Employees should be vigilant in obtaining assignments which is the key to keeping control of his company’s intellectual property.
Protecting Intellectual Property from Third Parties
Licensing one’s invention to third parties is the typical way for a company to turn a profit on its invention. To do this, you want to make sure that you have some or all of these agreements in place, depending on what stage of the licensing negotiation you are in with the third party. These can include:
- Confidentiality/Non-Disclosure Agreements (or “NDAs”). If you are negotiating with a third party, have these in place before disclosing any proprietary information and/or trade secrets.
- Material Testing Agreements (or “MTAs”). These allow for controlled testing of your invention or material by a third party.
3. Production Agreements/Propagation Agreements. These allow for third parties to produce and propagate your material, respectively.
- Commercial Licensing Agreements. These typically allow for a third party to use, make, and sell your invention or material to third parties.
Areas which need careful drafting of Agreement
Although an agreement as a whole is important, there are a few key areas in agreements that seem to consistently be problematic.
- Definitions. It is important that you have clear and concise definitions for key terms in an agreement. Whatever is the subject of the agreement, it should be clearly defined for example if the invention is the subject of the agreement and is not clearly defined it may lead to future ambiguity.
- Term. Term is again an important aspect of the agreement as it contains the duration of the agreement and also whether it gets renewed automatically or not.
- Governing law and venue. This clause mentions clearly that under which state law the agreement will be governed and if disputes arise where will it go for resolution.
- Royalties. How and when will royalties be collected under the agreement?
- Territory. This clause mentions Where exactly the subject of intellectual property will be tested, made, produced or sold in or outside the country.
- Assignability. This clause mentions whether the agreement can be assigned to another party.
Challenges of inventions assignment agreement
It is believed that even though most of the businesses get this agreement signed, it still suffers from the following challenges:
- Less bargaining power – The clauses in inventions assignment agreement basically gives the effect that whatever an employee creates or build belongs to the employer and not employee and sometimes the employee may feel they are underpaid for the hard work that they do which sometimes are quite unfair especially when there are no exclusionary clauses.
- Use of equipment – Even if the employee is bounded by the clause that he/she cannot use the company’s equipment or tools for his own work and the employee meticulously following it, sometimes the employer might state that the employee has used the company owned computer and has accessed company’s cloud and can claim the employee’s resulting software. This is stretching a clause way too much and is one of the biggest challenges in today’s invention agreements.
How to avoid pitfalls in an inventions assignment agreement
Once the employer leaves the organization, no employee would want to lose the rights over the assets created which gets protected by the intellectual property rights. Although, the Inventions Assignment Agreement helps in protecting the intellectual rights but sometimes small mistakes might lead to ambiguity and the inventions might slip away or missing any important point might leave the employer with a void agreement.
There are certain points that one should keep in mind while drafting the agreement to avoid pitfalls:
- The agreement should clearly state that the provision saying the employee shall assign, or offer to assign any of his rights to the employer shall not include the inventions that are made by the employee in his time and without using employee’s machines, tools, facilities etc. and this should not include the inventions related to the employer’s business or invention which is a result of employer’s research and development or a result of any work performed by the employee for the employer.
- Apart from including the wide range of assignment like inventions, discoveries, conceptions, improvements and original work of authorship in the agreement it should also include know-how and ideas created by the employee. It should consist of widest range of intellectual rights possible.
- One of the most important clause in the agreement is that the employee has to list down all his prior inventions so that these prior inventions are expressly excluded and company’s intellectual property is expressly included. This clearly indicates the scope of the agreement that anything which is not included in the agreement is outside the bounds of the agreement.
These are the various points that one must keep in mind while dafting an Inventions Assignment Agreements. Contrary to belief, there isn’t a true template of any of the agreements that would satisfy every party and every situation. Truth is, every licensing situation is unique and therefore, every agreement should also be unique and tailored to the particular parties and situation. Because of the potential legal complications involved with agreements, it is prudent to consult with an attorney when creating/drafting/reviewing agreements.
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