This article is written by Shubham Kumar Singh who is pursuing a Certificate Course in Intellectual Property Law and Prosecution from LawSikho.
With technological advancement, creativity, innovation and ideas, humans have transformed these into a valuable intangible asset. This intangible asset includes patents, utility models, trade secrets, trademarks, geographical indications, industrial designs, and topographies of integrated circuits, non-original databases, new varieties of plants, and copyright and related rights. These tangible asset holds great monetary value also goodwill and reputation is attached along with it. In order to exploit this intangible asset and avoid unauthorized use, it is extremely important to negotiate the terms of the agreement very carefully so that both the parties can be benefitted from the agreement and this agreement is known as Intellectual Property Rights Transfer Agreements.
Intellectual Property Rights Transfer Agreements
In the present era, intellectual property is dominating the world of business. This property, in simple words, can be defined as the right of the person over his creation which is new and different and distinct from the existing products or services or technology in the market. This property allows the owner a way to exploit their creation for commercial gains and also owner can transfer the right to a third party for royalties. It is the principle of law that if there is no written agreement, the IP rights remain with the creator. One of such important agreements governing the rights and liabilities of Intellectual Property owners is an IP Assignment Agreement.
The success or failure of a sale, purchase, license or franchise of an intellectual property right relies in having an effective assessment of the intangible asset and follow the recommendations and assess the possible risks when acquiring the intellectual property right, only this way, corporations can positively guaranty an investment. Here, the transfer can be in two ways, either assignment or license agreement.
Under an intellectual property assignment agreement, IP rights are assigned to the assignee in exchange for a specified sum. In simple terms, rights are sold to a third party the same way that a physical property for a permanent transfer can be done. In assignment agreement, control, involvement, and claim on the intellectual property rights transferred are relinquished in exchange for a specified sum. Whereas, under licensing agreement, ownership is retained with the owner and the party to whom the license is given use some or all of intellectual property rights for a specific amount of time for a fee or royalty.
Therefore, it very extremely important to determine whether to assign the intellectual property or license it. After determination, another essential aspect of agreement is how to negotiate the transfer agreement. Effective assessment of the intangible asset is required to accrue benefit out of it.
Negotiation of the agreement is not an easy task and requires lot of attention to understand the outcome of the agreement. There are certain aspects that should be kept in mind while negotiating the agreement for beneficial and successful discussions.
In the intellectual property agreement, it very crucial to determine the subject matter of the agreement i.e. the negotiation is regarding patent, trademark or copyright and very much clarity is required for the transfer of rights. In the definition clause of the agreement, intellectual property and rights are required to be defined properly to avoid any dispute in future.
Competitive analysis: Proper inquiry about the technology, goodwill & reputation, market share, potential subsequent development, profit in future are few aspects which have to be scrutinized properly for ensuring successful negotiation.
Confidentiality: It is quintessential to mention that the Confidential Information assigned as part of the Assigned Property except for the benefit of the Assignee. Also, the assigning party must take reasonable steps to maintain the confidentiality and secrecy of such Confidential Information and to prevent the unauthorized use or disclosure of such Confidential Information. Any breach of these restrictions will cause irreparable harm to Assignee and will entitle Assignee to injunctive relief in addition to all applicable legal remedies.
Consideration: One fundamental issue within negotiations is certainly monetary terms, more precisely whether there will be an upfront payment at the contract signature. Consideration clause is usually drafted as:
“NOW THIS DEED WITNESSETH that in pursuance of the Agreement and in consideration of the sum of Rs. _______________________ (In Word Rupees ___________________) duly paid to the assignor by the assignee by way of Cheque No __________ amount ___________________ drawn on ___________________ dated ______________ which has been acknowledged by the assignor.”
Indemnification: This clause is incorporated in the agreement to safeguard the assignee from any misrepresentation in the assignment agreement. The Indemnification Clause protects the Assignee from any expense, judgments, penalties, claims or demands which may be imposed on the Assignee through no fault of his and hence, vital protection against fraud or breach.
Representation and Warranties: This clause lays down Assignor’s liabilities and specifies the aspects on which the Assignee can lawfully and easily terminate the Assignment Agreement without much financial hassle. The warranty ensures that the assignor has sole possession of the intellectual property.
Termination clause: In the termination clause, all the aspects should be mentioned regarding when an agreement can be terminated. It is not necessary that termination shall result from any legal dispute. The termination can also be terminated by mutual consent. The termination clause may include situations wherein the agreement can be terminated e.g. non-payment of the fee or price of the agreement or breach of agreement from any party to the agreement or the quality of the product or service is not as good as the vendor described. The termination clause may also include force majeure as one reason for termination and insolvency.
Dispute Resolution: This clause provides details regarding how to resolve the dispute if arises in future between the two parties. This clause is pre-decided wherein it is agreed to amicably settle the matter with the help of an arbitrator and without going into the court. This cost-effective method is Arbitration one of the Alternative Dispute Resolution (ADR) method which used for disposal of commercial matter arises between the parties. In this clause, it is quintessential to mention the jurisdiction clause and governing law to initiate the arbitration proceeding.
The above mentioned are few important clauses which are the basis of any agreement. Any other clause may be included in the agreement depending on the terms discussed between the two parties.
As technology is developing, people are more and more being aware of their intellectual property rights. Every day thousands of applications for Trademarks, Copyrights, Designs and Patent are being filed, some transfer their intellectual property rights for commercial gain and thus this requires suitable and adequate legal documentation in order to successfully commercialize and give any benefits to their owner because any innovation without adequate safeguards is a treasure trove for infringers which disrupts the genuine claims of the rightful owner of the IP and causes loss of value to the economy.
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